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What is an Adverse Credit Remortgage?

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  • Written By: Mary McMahon
  • Edited By: O. Wallace
  • Last Modified Date: 24 August 2016
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An adverse credit remortgage is a home loan offered to someone with adverse credit. A remortgage is classically used to pay off an existing mortgage, and may also be used to do things like finance repairs or increase equity in a home. Banks which deal with people who have poor or adverse credit generally will not offer the same remortgage terms on an adverse credit remortgage as they would on a conventional remortgage, which is something to be aware of.

A remortgage is a second home loan taken out with a new lender, using the same property to secure the loan, which distinguishes it from a refinance, which can be a simple renegotiation of terms with an existing lender. When people take out a remortgage, they are usually expected to pay off the original mortgage. Since the house has often increased in value, they can also end up with extra cash which can be paid back immediately, used to finance repairs, or used for other purposes, depending on the need.

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”Adverse credit” is simply a term used to describe people who do not have very good credit. Individuals with poor credit often end up with home loans which have very bad terms. Getting an adverse credit remortgage can allow them to pay off the old mortgage with the unfavorable terms and get a mortgage product with lower interest and other benefits which may be appealing. As they repay the mortgage, their credit will improve, providing them with more access to consumer credit.

Remortgages with adverse credit are usually offered at a higher interest rate than standard remortgage products, because of the increased risk to the lender. However, the benefits can include getting a fixed rate, which will lower payments, or paying off a negative amortization mortgage before the balloon payment is due. People can also take advantage of the adverse credit remortgage to make necessary repairs which will improve the value of the home.

When applying for an adverse credit remortgage, people should be prepared for a home inspection in which the value and condition of the home will be assessed. They will also need to gather supporting financial documents which will be evaluated when the bank decides whether or not to offer a loan. It is important to be aware that it can take a month or more for all of the paperwork to be processed, and that if property owners have missed payments or are facing foreclosure, the bank may not be willing to negotiate an adverse credit remortgage.

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