What Is Adverse Credit Remortgage?

| January 30, 2007 | 0 Comments

Credit has gotten many people into trouble over the last couple of decades. Because of that, there have been many new terms developed in the financial industry. Adverse Credit remortgage is one of those terms.

Let’s break it down. Adverse is defined as opposing, or against (let’s just say bad). Credit is the time allowed for payment. Remortgage is the process of paying off one mortgage with the proceeds from new mortgage using the same property as security.

Put all together, and Adverse Credit Remortgage is one where a person that has not used credit wisely in the past (has judgments against him or a bankruptcy) and therefore has a bad credit rating (shown that he can’t be trusted) decides to sign a new mortgage on the existing property and pay off the old mortgage with the funds.

The term is most often used in the UK, but the concept is common around the world. In the United States, it is most often referred to as refinancing.

Deciding to remortgage a property should be determined by the interest rate. If the new rate would be two points lower than the existing rate, then the theory is that the remortgage would be worth the origination costs.

Even when there won’t be a significant rate change, a remortgage can be a benefit to even those with an adverse credit history – especially when there is equity (additional value over the existing mortgage) in the property. A borrower can then get that additional amount in cash and use it to pay down (or off) other higher interest debts. They can use the money to add on to or remodel the existing home, both of which would add more value to the property. They can use the money to purchase a high cost item like a car or new appliances.

A remortgage is not always the best choice to make, but it can have its benefits. Even an Adverse Credit Re-mortgage has its benefits for the borrower.


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