There are a growing number of lenders who will consider applications for problem remortgages. This is an indication of the growth in the market for home loan applications from borrowers with non-standard credit histories and financial situations over the past few years. Such growth has largely been consumer driven.



Problem remortgages are also known as non-standard, credit-impaired, or sub-prime mortgages, and the lenders are known as specialist lenders. Many of these specialist lenders are subsidiaries of mainstream lenders and are established under different names. This means that although applicants will apply for the home loans through a sub-prime lender, the reality is that the mortgage may be underwritten by a subsidiary of a high-street lender.

Specialist lenders will assess the facts of each problem remortgage case and, if the application is successful, offer a product with fees and charges appropriate to the level of risk involved. The level of risk will usually be deemed higher than standard borrowers and, as a result, interest rates and other charges will also be higher. Due to the competitiveness of problem remortgages these days, applicants with only a light adverse credit history will probably be offered terms and conditions that are almost the same as those attached to prime mortgage products.

Specialist products are competitive and loan-to-value ratios have been rising to reflect the strength of the property market, meaning that a smaller deposit is required. A deposit is, of course, only necessary for the purchase of a property and not the refinancing of an existing home. No deposit will therefore be required for problem remortgages because the borrower will already own the property.

Non-standard lenders will usually take the view that home loans for credit impaired individuals are only used by the borrower for several years while they repair their credit history. After it has been fixed, the borrower should be in a better position to apply for a standard remortgage product with a more competitive interest rate. It usually takes between three to five years of consistent loan payments before a credit file is repaired and an applicant can apply for a standard product. This is assuming that the borrower takes care of the remainder of their credit file.

In recent times the market for problematic home loans has faced turmoil. The overall credit market has experienced some dramatic changes and many mortgage products have disappeared from the market. Some specialist lenders have also closed up shop meaning there is now a narrow band of products to choose from for non-standard borrowers.

This does not mean the market has completely dried up however so borrowers need not panic. Instead borrowers need to conduct careful research and engage the services of a mortgage broker if necessary. An independent broker will be aware of the problem remortgage product available at any given time and will therefore be a valuable tool for researching the market.

When an appropriate product is discovered borrowers should act fast as the limited number of products available can change rapidly. Once again an experience mortgage broker should be able to assist.