Bad Credit Home Loans
Bad Credit Home Loans
A Bad Credit Home Loan is often required when 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.
Bad credit home loans allow you to purchase a home up to 95% of purchase price or refinance a home to 90% of property value. On a purchase of 95% LVR you will require sufficient funds above the 5% deposit to cover stamp duty and risk fees & loan costs. High LVR’s of 95% are only available in high population areas such as Capital Cities or Major Regional Cities and Towns.
For Vacant Land and Construction the maximum lvr is 70% with a maximum loan amount of $1,500,000 (must be high population areas)
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 etc?
- 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 80% of property value as long as they have not been recent and you can provide a reasonable explanation.
- For Paid or Unpaid defaults, Judgements, 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 re-occurrence.
What is the maximum loan I can apply for?
- 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 $1,500,000 to 80% of Property Value
- Will allow you to borrow to a maximum of $1,750,000 to 75% of Property Value
- Will allow you to borrow to a maximum of $2,000,000 to 70% of Property Value
- Will allow you to borrow to a maximum of $2,500,000 to 65% of Property Value
For Vacant Land and Construction the maximum lvr is 80% with a maximum loan amount of $1,500,000 (must be high population areas)
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.
As a general rule, bad credit home loans are priced based on the following parameters:
- The age of credit history defaults listed on the applicants credit report (the older the better).
- Whether or not the defaults and judgments are paid, settled or unpaid at the time of application (paid or settled is far better than unpaid).
- The nature and type of the credit defaults or judgments (such as a telco, utility or financial institution default). Generally, telco and utility-related defaults are less severe than financial default listings.
- What LVR the bad credit home loan applicant is seeking (the lower the loan to value ratio, the lower the risk to the lender, therefore qualifying the lender for a lower interest rate)
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.