What is a Bad Credit Home Loan?
This loan is designed to assist those home loan borrowers with bad credit or a poor credit history to purchase or refinance a home. By refinancing and consolidating your debts you may be able to minimise your repayments, settle debts in default and eventually clean up your credit rating before refinancing to a prime loan when credit file is clean.
The level of impairment can range from defaults, arrears to bankruptcy with interest rates on Bad Credit Home Loans determined by level of credit impairment and LVR
At some point in the past, a borrower may have experienced difficulty in meeting their monthly commitments due to lack of work, in suffering an unexpected business loss or by having a difference of opinion with a former credit provider. Unfortunately, in these cases the former credit provider may have lodged a payment default (or black mark) on their credit report with a credit recording agency. These borrowers have generally experienced a “life event” such a period of unemployment, a marriage breakdown, illness or a business failure and are considered high risk by most lenders even if they have overcome the event that caused the impairment
These type of bad credit home loans are often seen as a stepping stone to help individuals get back on track and after a period of solid payments the loans can be refinanced to a lesser rate.
What are my options with Paid or Unpaid Defaults, Judgments?
- Minor paid defaults up to $500 can usually be accepted by some banks and lenders / mortgage insurance up to 95% of property value e.g Telcos and non financial defaults
- Some funders that have delegated authority with mortgage insurers may accept paid defaults up to 90% of property value as long as they have not been recent and you can provide a reasonable explanation.
- For Paid or Unpaid defaults, Judgments, Writs & Summons that do not fit the above criteria generally you will need to obtain finance from a Specialist Lender. We have many of these lenders on our panel and each case needs to be analyzed to find the best and lowest rate option for you with the easiest exit strategy for you to refinance to a lower rate lender when your credit report is clear. All these Funders require a detailed account of how and when the impairments occurred; as well as an explanation on how and why the event is no longer an ongoing concern with little likelihood of reoccurrence. We have specialist lenders that can lend you up to 95% of the property Value on a purchase and 90% of a refinance.
What are my options if 1 Day Discharged Bankrupt or Part 9 or 10 if PAYG?
- Will allow you to borrow to a maximum of $750,000 to 95% of Property Value
- Will allow you to borrow to a maximum of $1,000,000 to 85% of Property Value
- Will allow you to borrow to a maximum of $2,000,000 to 70% of Property Value
Note: Part 9 or 10 can refinance to pay out Part 9 or 10 debts during debt agreement
What are my options with Mortgage Arrears?
Home loan arrears are a very serious business that could result in the funder re-possessing your house and selling it to recover their money so any funder refinancing this loan will want to be certain that there will be no reoccurrence. People find themselves in this financial situation due to one off life circumstances such as illness, loss of employment, divorce etc. – and now have the capability to pay the repayments of your loan on time but can not catch up.
- Minor arrears due to a one off event (sickness, Unemployment etc) can be dealt with directly with your lender usually without the need to refinance especially if you are not too highly geared.
- Up to 2 Arrears can be refinanced by a specialist lender up to 80% LVR
- Over 2 Arrears can be refinanced by a specialist lender up to 75% LVR
Each loan has to be treated as an individual basis so it is important to deal with a broker that has several options and is experienced in bad credit history lending.
Credit Impaired – higher risk, higher rate
Since you are considered a higher risk, the Lender will typically charge you a higher interest rate for a non conforming home loan. The greater the risk, the higher the interest rate. While you’d obviously prefer to pay a lower interest rate, a non conforming mortgage at least lets you get back in the game.
Improve your credit rating
With a bad credit home loan, many lenders might start you off on a higher interest rate, but if you meet your repayments for an agreed period, they’ll reduce that rate. A non conforming home loan can be a good way for someone with a bad credit history to improve their credit rating.