Can I refinance my home loan?

You can refinance a home loan with missed payments, however, the amount that you can borrow and the lenders that you can apply with will depend on your situation.

  • Minor late payments: You can borrow up to 80% with a major lender or 90% with a specialist lender.
  • Up to two missed payments: You can borrow up to 80% of the value of your property with a specialist lender.
  • The lender is taking legal action: You can borrow up to 75% of the value of your property with a specialist lender. However, you must prove that you’re no longer in financial trouble.

Please call our mortgage brokers on 1300 889 743 or enquire online to find out how we can help!

What is a mortgage in arrears?

Mortgage in arrears is when you have not made the required payments on your home loan. This includes missed repayments, late and overdue payments.

Generally, people find themselves in this financial situation due to life circumstances such as illness, loss of employment, divorce or situations that are unexpected and certainly unplanned for.

Home loan arrears is a very serious business that could result in the bank re-possessing your house and selling it to recover their money.

However, minor arrears due to a one off event can be dealt with directly with your lender usually without the need to refinance. Long term problems on the other hand may require a complete financial overhaul.

Missed payment or late payment?

If you’ve made several late payments or have missed payments on your mortgage then it’s likely that you’ll find it hard to apply for a loan through the major banks and lenders.

This is because they’re able to see you repayment history information on your credit file and don’t want to approve a loan for a borrower who doesn’t have the capability to make regular repayments on time.

You should be aware that having a missed payment and failing to make your repayment on time are two very different situations:

  • A missed payment is a payment that you completely missed and never made up.
  • A late payment is one that you didn’t pay on time but did eventually make up the repayment.

With the implementation of positive credit reporting, you should always try to pay your repayments on time and be completely aware of the monthly payment date especially if the repayments are by direct debit.

How do lenders view your current arrears?

The major banks and other prime lenders will not approve your loan if they can see any arrears.

They don’t lend to people who have missed payments on their current home loan, in particular during the previous six to 12 months – they are very strict in this regard.

There are specialist and non-conforming lenders that can help! They tend to assess your loan based on how long it took you to make up your missed payments and if you can handle your current commitments or if you’re over committed.

Please enquire online or call us on 1300 889 743 to speak to one of our specialist mortgage brokers who can find you the best lender to get your loan approved!

How to refinance if you have arrears

To refinance your current home loan, you’ll need a specialist mortgage broker to find you a lender that can consider your situation. This is particularly true of people that are close to having their home repossessed.

However, we won’t help people that don’t benefit from refinancing their arrears. If you can’t make the repayments on your home then it’s better to sell your home rather than refinance and just end up in the same situation again.

Please enquire online to speak to our specialist mortgage brokers who’ll guide you to the right direction.

What is the arrears rate / default interest rate?

If you’re behind with your payments then the lender will charge you a default or penalty interest rate. This is normally charged on the amount that’s overdue. However, in some cases, this will be charged on the entire loan amount.

This is why it’s extremely important that you make your repayments on time – you’ll avoid the risk of being charged any defaults on your loan.

How long is it until your bank takes action?

The banks will take action when they can see that there have been constant arrears on your home loan.

  • High LVR over 80% – generally 2 missed payments.
  • Low LVR under 80% – generally 3 or more missed payments. In this situation, the banks will tend to work with you rather than possess your home.

Some lenders tend to take action faster than others depending on their hardship policy. It’s important to talk to your lender and work with them rather than hide and to look for an exit strategy such as selling your home, refinancing or consolidating your debts.

What action will your bank take?

“Empathy” is not the word that best describes our financial institutions of today. The welcoming smiles that we see on television advertisements can disappear when the customer’s life circumstances changes for the worse.

The banks sometimes have no hesitation in taking action if the borrower has breached their contract, which is generally when they have a mortgage in arrears.

If the bank believes that you’re unwilling or unable to co-operate then they’ll almost surely take quick and decisive legal action against you.

How can I apply to refinance my home loan in arrears?

The longer you leave it the more bank fees, lawyer fees and real estate fees will eat into your equity that you have in your home.

Most of the time a new home loan or debt consolidation can be approved with the right lender, you just need an expert to find that right lender!

Please enquire online or call us on 1300 889 743 to see how we can be of help!

  • Tina

    I was on a vacation abroad and completely forgot to pay out fortnightly repayments. However, I’ve amended that and made the payments to the bank, will this stay on my credit history?

  • Hi Tina, this will surely affect your history with the bank, however, depending on how long you didn’t make those payments, it may or may not appear on your credit file. I would suggest you to request a copy of your credit report to see it this has been listed or not.

  • whittingham

    Hi, I’ve paid off a $880k home loan to 80% LVR but due to some financial stress missed two payments. I want to refinance but am finding it difficult as it’s a water access only property.

  • Hey whittingham,

    We have two lenders in mind that may be able to help. Up to two misses payments is okay although you may be required to provide plausible explanation for those. Please call 1300 889 743 to discuss this with an expert mortgage broker.

  • Elsa

    I’ve had several late payments but haven’t missed any. I am okay to refinance, right?

  • Hi Elsa, a couple of late payments would have been okay with some lenders but several late payments will be seen as a potential issue and assessed in a similar way to that of having missed a few payments. Please feel free to contact us if you’d like some help to finding a lender that can be more flexible with your situation.

  • Harris

    What about refinancing if I have defaults?

  • You can refinance even if you have defaults although this will depend on how much you have in defaults. Please check out the home loan with defaults page to find out more:

  • Sporty

    I am in arrears in my home loan and am still one month behind but will be caught up this week. The interest rate is very high so I was wondering, what are my chances of refinancing when my mortgage is in arrears?

  • Hi Sporty,
    The major banks and other prime lenders will see this poor repayment history and may not approve your loan. Since you’re a month behind, I’m assuming you missed one or two repayments. If this is the case, you could refinance with select specialist lenders up to 80% of the property value. However, please note that specialist or non-conforming lenders will charge a high interest rate, so please contact us before proceeding further as we are specialists in bad credit home loans. Alternatively, you could wait for another 6 months and make regular repayments in that time and try refinancing with a major lender afterwards. In that way, you can get a much cheaper rate.

  • Patricia

    Hi, how many days after missed repayment does the home loan default? The last payment missed was on April 4th. Will this affect my credit score?

  • Hi Patricia,
    Typically, a default notice will be sent to you if your repayment is 60 or more days overdue. The notice will give you 30 days to repay the mortgage arrears plus the regular repayment on your home loan. The timeline also depends on the lender.
    Due to the introduction of comprehensive credit reporting, the missed repayments will be reflected on your credit file and will adversely affect your credit score. Previously, only negative information such as defaults and judgements were seen on your credit file.