If you are behind with your mortgage payments, you may wonder whether remortgaging could provide a way out of the problem.

Perhaps your current mortgage has become expensive, your circumstances have changed, or you believe that a different mortgage product could reduce your monthly payments. In some situations, a borrower may also consider whether additional borrowing could be used to deal with existing mortgage arrears.

But there is an important problem: mortgage arrears can make it significantly more difficult to obtain a new mortgage.

Remortgaging is not simply a matter of finding a cheaper interest rate. A new lender will normally want to assess your financial circumstances, credit history, income, expenditure and ability to maintain the proposed mortgage payments.

MoneyHelper specifically warns that borrowers who are currently in mortgage arrears, or who have missed mortgage payments within the previous 12 months even if they are no longer in arrears, are likely to struggle to remortgage.

That does not necessarily mean remortgaging is impossible in every circumstance. It means the options available to someone with mortgage arrears can be much more limited.

What Does Remortgaging Mean?

Remortgaging generally means replacing your existing mortgage with a new mortgage, usually with a different lender, while remaining in the same property.

It is different from simply asking your existing lender to change your mortgage product.

For example, a homeowner might currently have a fixed-rate mortgage that is coming to an end. They may compare the rates available from other lenders and decide that moving to a new mortgage could reduce their monthly payments.

However, a new lender will normally carry out its own assessment before agreeing to the mortgage.

This is where mortgage arrears can become a significant obstacle.

If you are already struggling with your mortgage payments, it is also worth understanding the earlier stages of the problem. Our guide What Happens If You Miss a Mortgage Payment in the UK? – Immediate Bank Claims explains what can happen after a payment is missed and why dealing with the situation early can be important.

Can You Remortgage While You Are in Mortgage Arrears?

There is no simple rule saying that someone with mortgage arrears can never remortgage.

However, it can be considerably more difficult.

A new lender will normally want to establish whether you can afford the proposed mortgage. Your existing arrears may also raise concerns about your recent payment history and whether the new mortgage would be sustainable.

MoneyHelper states that if you are currently in mortgage arrears, or have missed mortgage payments in the last 12 months even if you are no longer in arrears, you are likely to struggle to remortgage.

This is important because someone who has already demonstrated difficulty maintaining their existing mortgage may find it harder to persuade another lender that a new mortgage represents a sustainable solution.

Why Do Mortgage Arrears Make Remortgaging More Difficult?

The main issue is risk.

A new lender is being asked to take on a mortgage for a borrower who has a recent history of missed payments.

Even if the borrower has a good reason for falling into arrears, the new lender will still need to consider the available evidence.

For example, there is a significant difference between a borrower who missed two payments during a temporary period of unemployment and has since restored their income, and someone whose income remains insufficient to meet the existing mortgage.

The lender will want to understand what caused the arrears and whether the underlying financial problem has now been resolved.

Does Your Credit Record Matter?

Yes.

Mortgage arrears and missed payments can appear on your credit history and may affect how prospective lenders assess a new mortgage application.

A lender is likely to consider your recent payment history as part of its overall assessment.

This means that even if the property has substantial equity, a borrower may still face difficulty obtaining a competitive remortgage if their recent credit history shows mortgage arrears.

If you have recently missed a mortgage payment, our article Can Missing One Mortgage Payment Affect Your Credit Score in the UK? – Immediate Bank Claims explains why the payment history can matter beyond the immediate arrears.

What If the Mortgage Arrears Have Already Been Cleared?

Having cleared the arrears can put you in a better position than remaining in arrears, but it does not necessarily mean that a new lender will ignore the previous missed payments.

MoneyHelper specifically notes that even borrowers who are no longer in arrears but have missed mortgage payments during the previous 12 months may struggle to remortgage.

The timing of the missed payments can therefore matter.

A borrower who cleared the arrears several years ago may be in a very different position from someone who cleared them only a few months before making a new mortgage application.

The lender’s individual criteria will also matter.

Can You Remortgage to Pay Off Mortgage Arrears?

This is where the situation becomes particularly important.

A borrower may think:

“If I could borrow enough to clear the arrears, I could get the mortgage back under control.”

In theory, refinancing can sometimes be considered as part of a wider financial strategy. However, the problem is that the same arrears that need to be cleared can make it difficult to obtain the new borrowing in the first place.

A lender may not be comfortable advancing additional funds to a borrower whose existing mortgage payments have not been maintained.

There is also a risk in using additional secured borrowing simply to deal with existing financial problems without addressing the underlying affordability issue.

The borrower therefore needs to consider whether refinancing genuinely solves the problem or simply moves the debt into a different arrangement.

What If You Have Significant Equity in the Property?

Property equity can be relevant, but it does not automatically guarantee that a remortgage will be approved.

Suppose a property is worth £400,000 and the existing mortgage is £200,000.

The borrower may have substantial equity.

However, if the borrower has also experienced significant mortgage arrears, a new lender may still be concerned about the payment history and affordability.

The amount of equity can reduce the lender’s loan-to-value exposure, but the lender still needs to consider the borrower’s ability to make the payments.

This is why having equity and being able to obtain a new mortgage are two different questions.

What If the Property Is Worth More Than the Mortgage?

A strong property position can potentially help, particularly where the loan-to-value ratio is relatively low.

For example, a borrower with a £150,000 mortgage secured against a property worth £400,000 has a substantially different loan-to-value position from someone who owes £350,000 against a £400,000 property.

However, low loan-to-value does not automatically overcome affordability or credit-history concerns.

MoneyHelper explains that a high loan-to-value ratio can make remortgaging more difficult, while negative equity can also create problems.

The lender will therefore consider the overall application rather than looking at property value alone.

What About Buy-to-Let Landlords?

The issue can be particularly complicated for landlords.

A landlord may have substantial equity in a rental property but still experience mortgage arrears because of tenant arrears, prolonged void periods, unexpected repairs or reduced rental income.

For example, imagine a rental property worth £500,000 with a £250,000 mortgage.

On the face of it, the property has significant equity.

But if the landlord has accumulated mortgage arrears because rental income has fallen substantially, a new lender may still question whether the proposed mortgage is sustainable.

The landlord may therefore need to demonstrate not only the value of the property but also the underlying rental income and wider financial position.

Can You Remortgage With a Specialist Lender?

Some borrowers who do not fit mainstream lending criteria may investigate specialist mortgage products.

However, specialist lending can come with different eligibility requirements, interest rates, fees and risks.

A borrower should not assume that finding a lender willing to consider an application automatically makes the proposed mortgage affordable.

If the mortgage is secured against the property, failing to maintain the new arrangement could still put the property at risk.

It is therefore important to consider the total cost of the proposed mortgage rather than focusing only on whether an application has been accepted.

What If Your Current Mortgage Deal Is Coming to an End?

This situation can create additional pressure.

A borrower may be approaching the end of a fixed-rate mortgage while also dealing with arrears.

Ordinarily, the end of a fixed-rate period might be a good opportunity to compare alternative mortgage products.

But if the borrower has recent missed payments, moving to another lender may be more difficult.

MoneyHelper recommends reviewing mortgage options before an existing deal expires, but also notes that borrowers with recent mortgage arrears may struggle to remortgage.

This means that someone with arrears should not wait until the last moment before considering what options may be available.

What About Staying With Your Existing Lender?

Remortgaging does not always mean moving to another lender.

Your existing lender may have alternative mortgage products available, sometimes referred to as a product transfer.

The requirements can be different from making a completely new application with another lender.

MoneyHelper notes that some borrowers who struggle to obtain a new mortgage may find it useful to check whether their existing lender can offer an alternative product.

However, a borrower with arrears should not assume that an existing lender will automatically agree to a new product or that changing products will resolve the arrears.

The arrears still need to be addressed.

Can a Payment Arrangement Help Before Remortgaging?

Potentially, but it depends on the circumstances.

A borrower may first need to stabilise their mortgage payments and deal with the arrears before a future remortgage becomes realistic.

For example, someone who has temporarily fallen behind might agree a sustainable arrangement with their existing lender, maintain the mortgage payments and gradually reduce the arrears.

Once their financial position has stabilised, they may be in a stronger position to consider refinancing at a later date.

This is very different from trying to use a new mortgage immediately to solve an unresolved affordability problem.

Our previous article Can a Bank Refuse a Mortgage Payment Arrangement in the UK? – Immediate Bank Claims explains why a borrower does not necessarily have an automatic right to demand a particular repayment arrangement and why affordability and sustainability matter.

What If You Cannot Clear the Arrears Immediately?

Not being able to clear the arrears in one payment does not necessarily mean that remortgaging is the only possible solution.

Depending on the circumstances, the borrower may need to discuss repayment options with the existing lender.

Current FCA rules require firms to treat customers in or approaching mortgage arrears with forbearance and due consideration.

MoneyHelper also states that lenders must make reasonable attempts to reach an agreement with borrowers experiencing mortgage payment difficulties, including considering whether the way and timing of payments can be changed.

This does not mean that every proposed arrangement must be accepted, but it does mean that borrowers should not assume that the only options are immediate repayment or repossession.

Should You Apply to Multiple Lenders?

Care is needed here.

A borrower who is rejected for a remortgage may be tempted to immediately apply to several other lenders.

However, multiple applications can potentially create additional credit-search activity and may not solve the underlying problem.

MoneyHelper specifically warns that if you are rejected for a remortgage, applying again with another lender can risk weakening your credit score.

It may therefore be sensible to understand why the first application was unsuccessful before making further applications.

A qualified mortgage adviser may also be able to assess which products are realistically available before multiple applications are made.

What If You Are Already Facing Repossession?

If mortgage arrears have progressed to the point where possession action is being considered or has already started, remortgaging becomes a much more urgent and complicated issue.

The borrower should not assume that a potential remortgage automatically stops possession proceedings.

The legal position depends on the stage reached, the lender’s actions and the individual circumstances.

Anyone already dealing with serious arrears should understand the wider process. Our guides How Many Mortgage Payments Can You Miss Before Repossession in the UK? – Immediate Bank Claims and Mortgage Repossession Process in the UK: What Happens From Start to Finish – Immediate Bank Claims explain how mortgage arrears can progress towards possession.

If court proceedings have already started, borrowers should take the court documents seriously and obtain appropriate professional advice.

Is Remortgaging Always the Best Solution?

Not necessarily.

A lower monthly payment may appear attractive, but the borrower should consider the total cost of the new mortgage.

A longer mortgage term, arrangement fees, valuation costs, legal costs and early repayment charges can all affect whether refinancing actually improves the overall position.

MoneyHelper recommends considering fees and charges when comparing remortgage options, because a lower interest rate does not automatically mean the new mortgage will be cheaper overall.

There is also a wider question.

If the borrower is remortgaging simply because they cannot afford the current mortgage, extending the term or increasing borrowing may reduce the immediate monthly payment without resolving the underlying financial problem.

What Should You Do Before Considering a Remortgage?

The first step should be to establish exactly where you stand.

You should know the current mortgage balance, the amount of arrears, the property’s approximate value and the current monthly mortgage payment.

You should also understand your income, essential expenditure and other financial commitments.

If the property is rented, the landlord should also consider actual rental income, void periods, maintenance costs and other property expenses.

Once the financial position is clear, it becomes easier to determine whether remortgaging is genuinely realistic or whether dealing with the existing lender should come first.

A Practical Example

Consider a homeowner whose property is worth £350,000 and whose mortgage balance is £175,000.

The homeowner has experienced a temporary period of unemployment and accumulated £4,000 of mortgage arrears.

Their employment has now resumed and their income has recovered.

The homeowner may have substantial equity and may believe that remortgaging to a new lender would solve the problem.

However, the recent mortgage arrears could make obtaining a new mainstream mortgage difficult.

Instead, the borrower may first need to discuss the arrears with the existing lender and establish whether a sustainable repayment arrangement can be maintained.

After the financial position has stabilised and sufficient time has passed, a remortgage may become more realistic.

Now consider a different borrower who remains unable to afford the existing monthly mortgage payment.

In that situation, simply finding a new mortgage may not solve the underlying problem.

Can Mortgage Arrears Be Cleared Before Remortgaging?

Where financially possible, clearing the arrears and demonstrating a period of stable payments may improve the borrower’s future position.

However, borrowers should not take expensive unsecured borrowing simply to make the mortgage account appear up to date without considering the consequences.

The FCA has warned consumers struggling with mortgage payments to be cautious about risky offers and to seek appropriate support rather than relying on arrangements that could worsen their financial position.

The right approach depends on the individual’s circumstances.

Conclusion

So, can you remortgage with mortgage arrears?

It may be possible in some circumstances, but mortgage arrears can make obtaining a new mortgage significantly more difficult.

A lender will normally want to understand the borrower’s income, expenditure, credit history, property value, loan-to-value position and recent payment history.

MoneyHelper specifically states that borrowers currently in mortgage arrears, or who have missed mortgage payments within the previous 12 months, are likely to struggle to remortgage.

For that reason, remortgaging should not automatically be treated as the solution to mortgage arrears.

In some circumstances, dealing with the existing lender first, stabilising the mortgage payments and addressing the arrears may be a more realistic approach.

For borrowers who are considering refinancing because they are already struggling financially, the key question should not simply be whether a new lender will approve the mortgage.

The more important question is whether the new arrangement genuinely makes the overall financial position sustainable.

If mortgage arrears are already serious, taking action early and obtaining appropriate independent advice can be important before the situation progresses further.

Disclaimer

Immediate Bank Claims is not a firm of solicitors or barristers. We provide independent support, guidance and assistance in matters relating to property repossession, mortgage arrears, LPA Receivers, debt matters and related issues. This article is provided for general information only and should not be treated as legal or financial advice. Individual circumstances vary, and appropriate professional advice should be obtained where necessary.