If you have black marks on your credit file, you may have to apply with a non-conforming lender that will charge bad credit interest rates which are much higher than standard home loan rates.
How do specialist lenders apply their rates and is it possible to refinance to a major lender at a better rate in the future?
Why do specialist lenders charge a higher interest rate?
As specialist lenders are taking on a higher risk when approving people with bad credit, they charge a higher interest rate to mitigate this.
These lenders are known as non-conforming lenders because they’re unregulated, non-deposit taking institutions (non-ADIs).
Specialist home loan providers have significant customer data and have identified that many borrowers with a poor credit file simply made a one off mistake, want a second chance and are less likely to default compared to someone who has never had a bad credit listing.
It’s for this reason that they will consider black marks that wouldn’t be approved by a mainstream lender, such as:
- Multiple credit enquiries
- Discharged bankruptcy
- Court writs
- Debt agreements (Part IX)
- Tax (ATO) debts
- Debt consolidation
- Mortgage in arrears
Golden tip:Having an adverse credit history doesn’t always mean you need to pay bad credit interest rates.
Please call us on 1300 889 743 or complete our online enquiry form today.
We’re experts in bad credit home loans and know how to present a strong case to the right lender.
In some cases, we can get exceptions to standard lending policies because of the relationships that we have with major banks.
How much will I be charged?
On average, specialist lenders charge around 2-2.5% higher when it comes to bad credit interest rates.
You can use this risk matrix to get an understanding of how non-conformers apply their interest rates.
You’ll see that interest rate premiums vary depending on the nature of the adverse credit listing and how long it’s been on your credit file.
A bad credit home loan is a short-term solution!
Depending on the nature of your bad credit, you may be able to refinance to a major lender in as little as six months after your home loan settles.
If you have any form of a bad credit on your Equifax report, you’ll generally need to wait until this is clear before refinancing (5-7 years for most listings).
We work with many specialist lenders and know the complete, inside picture of bad credit hme loans.
We pride ourselves on being able to get your bad credit home loan approved at a competitive interest rate based on your circumstances.
Speak to us on 1300 889 743 or fill in our free online assessment form and discover if you can qualify for a home loan despite a poor credit file.
We will work with you, every step of the way after settlement to plan your move back to a major bank when the time is right.
Can I apply with a major lender straight away?
Normally, people with a bad credit history have to go to a specialist lender to get approved for a home loan.
A standard lender tends to be risk-averse and, usually, won’t lend to people with bad credit.
However, it depends on the severity of the black marks on your Equifax file.
In some cases, they can make exceptions if the black marks on your credit file are only minor and were a one-off event.
This is particularly true of life events such as getting divorced or suddenly losing a job: this can quickly put people in short-term financial hardship.
If you can provide evidence that you’re now past this event and have been making your financial commitments on time, you’re in with a better chance of getting approved with a major lender.
The key is how you present your application and which lender you choose.
This is where a specialist mortgage broker can help.
What are specialist lenders?
Specialist banks are non-major lenders who are dedicated to offering alternative home loan solutions to borrowers who are unable to meet the lending criteria set by banks and Lenders Mortgage Insurance (LMI) providers.
Among the 50+ lenders that we have on our panel, we have a number of prominent non-conformers including:
Will mortgage brokers charge a fee to help bad credit borrowers?
In most cases, there is no fee applicable to use our services.
However, depending on the complexity and nature of your situation, a service fee may be payable on approval of your loan.
In case we decline to take on your loan or your loan is declined by the bank, then we don’t charge you a fee for our services.
Please call us on 1300 889 743 or enquire online to speak with one of our bad credit mortgage brokers and find out how we can help you get approved for a bad credit mortgage.