The financial economy all over the world is in very dire straits. Mortgage default rates are higher than they have ever been before. Unemployment rates are up worldwide. Annual income has decreased for the average household. For these reasons, most people assume that it is simply impossible to obtain a remortgage. The truth, however, is that the market for adverse credit remortgages is as large as it has ever been, and there are still a substantial amount of lenders offering these loans.
Higher Foreclosure Rates
This is not to say that there have been no changes in the way that lenders think about remortgage and adverse credit. There have been. Lenders have seen higher foreclosure rates than they ever expected to see, and as a result, they are all very leery of lending in the same manner that they have in the past.
Bad Credit Remortgages
The problem with this, though, is that mortgage lenders have to offer mortgages and remortgages in order to stay in business, and in an economy like the one of today, this means that they are going to have to find ways to be able to comfortably lend on a bad credit remortgage loan. This means that the only options that a lender has is to rewrite their underwriting guidelines and continue lending on bad credit remortgages, or to go out of business.
Financial Risk
This means that borrowers looking to obtain an adverse remortgage are going to be able to find a good loan program, provided they are willing to put in a little bit more work, for example by using a remortgage calculator, and look a little harder. They can still get the bad credit remortgages, but are going to need to go the extra mile to prove to lenders that they really are a good financial risk, despite their adverse credit.
Mortgage Backed Securities
In the past, lenders had no trouble selling their loans on the secondary market, regardless of whether they were purchase mortgages with good credit, or if they were remortgages with adverse credit. It really made no difference. The market was hungry for mortgage backed securities, and would buy any portfolio of mortgages, regardless of the scenarios involved. For this reason, obtaining an adverse credit remortgage was a very easy process. No one was overly concerned with the causes for the bad credit or the likelihood of repayment, as the loan was going to simply be sold within the first few months anyway. In today’s market, however, the secondary market for adverse credit mortgages simply does not exist, and thus, lenders must hold onto these loans themselves.
Adverse Credit
This just means that you need to go in to the process of a bad credit remortgage knowing that there will be a lot of work ahead of you. Unlike in the past, you are going to need to paint a picture of your financial situation that shows that you are a better risk than your credit indicates. You will need to explain what has caused your adverse credit, and you are going to have to go the extra mile to prove to an underwriting that you not only have the ability to repay your loan, but also have the willingness to do so.
This whole process is not as difficult as it sounds at first. The idea here is to show that events outside of your control happened to you and caused a financial situation that you could have done nothing about. If you can prove this, it is then just a matter of showing the steps that you have started taking to ensure that this never happens again.
Conclusion
The main difference between a problem remortgage of today and one of two years ago is just that the burden of approval lies on the shoulders of the borrowers, not of the lenders. It is very possible to get approval for these loans, but in order to do so, you are going to need to go the extra mile and prove that you are a good borrower and deserving of the loan.
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