Reader Question
I have an existing mortgage which I have managed through difficult circumstances to hold on to but I now have a terrible credit score because of CCJ's from credit cards but I have never missed a mortgage payment. My payments are low due to low rates but I'm always worrying about rises. I've been told that I will never get another mortgage due to credit history. Is that true or can you remortgage with a bad credit history? The property I am thinking of remortgaging is a holiday let (without the mortgage company's permission) but it does bring a rental income that covers mortgage and costs.
Having said that I think my current monthly mortgage payments are lower than I would get anywhere else but I guess what I'm asking is should I worry about rate rises and does anyone know the answer to that?
Dean's response
It sounds as though you have done your best under difficult circumstances.
Having a bad credit score and CCJ’s doesn’t necessarily exclude you from refinancing, although it makes it very difficult, it depends how long ago the CCJ’s and defaults occurred and whether you have managed to keep any credit arrangements (not just the mortgage) up to date in the last 2 years, also your current income situation and equity in the property.
The simple answer is that none of us have a crystal ball and can predict interest rates, however recent comments from the bank of England and recent economic indicators suggest that it’s unlikely rates will rise significantly in the next year at least, probably longer. So no need to worry unnecessarily as yet
You may want to broach the holiday let situation sooner rather than later with your lender anyway, as if the mortgage company finds out themselves, they may increase your rate to a ‘buy to let’ rate and this will clearly increase your repayments. If a borrower asks for ‘permission to let’ the lender is unlikely to refuse or increase the interest rate, but will likely charge a one-off fee of maybe £150 - £200 or so (varies wildly from lender to lender). If you do this they may be more likely to help if times get tough when rates do eventually start to rise, They have to be considerate under ‘Treating Customers Fairly’ guidelines, but if you’ve broken their rules their help will be the bare minimum they have to provide.
I hope that helps.
Dean Mason - Cemap, Cert PFS.
Practice Principal
Masons Financial Planning
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