Refinance bad credit loan
Refinancing a non conforming loan
Many people seek a non conforming loan, private loan or specialist lender if they have had a credit problem or if they can’t get a bank to accept their loan.
Ultimately a bad credit home loan is designed to be a “short term” solution for between 6 months to 5 years depending on your situation and credit history.
When you are eligible to refinance your loan, then you should switch back to a cheap loan with a major lender such as a bank, building society or credit union and benefit from their lower interest rates.
Why refinance?
Non conforming loans, bad credit home loans and in particular private loans have much higher interest rates than normal bank loans.
By refinancing you can either reduce your repayments or you can continue to make the higher repayments and save even more off your mortgage, for example:
- If you have a loan of $500,000 at a rate of 10% then you are paying $4,387.86 / month whereas on a rate of 7% you would pay only $3,326.51 / month!
- Over 30 years the difference between the two loans is a whopping $382,085.11 in interest!
It is because of this that refinancing your bad credit home loan should be done as soon as possible.
What are the costs?
The new loan will just have the normal setup costs which are usually from $0 to $800 depending on the lender.
You may have to pay early exit fees on your existing loan such as a Deferred Establishment Fee (DEF), Discharge Fee, Early Termination Fee or Break Cost (fixed rate loans only). These exit fees usually only apply for the first few years that the loan is open. Please refer to your lender for the exact exit fees.
How do I know if I am eligible for a bank loan?
Generally you are eligible to refinance out of a non-conforming lender once you meet standard bank criteria. This generally means that:
- You owe 80% or less of your properties value.
- All of your defaults are paid or are no longer showing on your credit file.
- You have full income evidence (low doc loans may be available in some cases).
- You have made all of your repayments on time in the last 6 months.
In these cases you may qualify for a loan with a major bank. Please enquire online to speak to one of our specialist mortgage brokers who can help you to work out which lenders will accept your loan.
What if I am ineligible?
Not everybody is eligible to refinance right to a bank loan, in these situations we usually refinance to a cheaper specialist loan before refinancing to a major lender.
Generally we use this option if you have serious problems with your credit file that are going to remain in place for many years. We will calculate if it is worthwhile for you to refinance or if it is better for you to wait for your credit history to be completely clear before refinancing to a prime lender.
Apply to refinance your bad credit loan
The next step is to speak to a specialist mortgage broker such as ourselves and find out if you are eligible for a loan. Please enquire online to discuss your situation with one of our experts.
