Last Updated: 6th June, 2023

Maintaining a good credit score can be a real challenge. A single late repayment can drop your score by 100 points or more. Sometimes, the reason for a decline in your credit could be as simple as a temporary dip in your income. In other cases, you may have experienced prolonged financial difficulties that led to missed payments or bankruptcy, which now remain on your credit file. Whatever the reason, refinancing a mortgage can be difficult for someone with bad credit, but is also one of the smartest things to do. Refinancing with bad credit:
  • Lowers your monthly repayments
  • Gets you a longer repayment period
  • Helps you pay off all your debts sooner
  • Gives access to more features and flexible policies
Even if your credit has narrowed down your refinancing options, there are still five great ways to refinance.

1. Check With Your Current Lender

Your current lender may be willing to work with you on refinancing, even if your credit score has taken a hit. If convinced, they can offer a lower interest rate or more flexible repayment terms to help you avoid late repayments, to reduce the chances of default, or simply to keep you from refinancing with a competitor. Restructuring your loan with your current lender saves you time and money because you don’t have to go through a prolonged refinancing process with another lender. So, if you are considering refinancing, your first step should be checking in with your current lender.

2. Short-Term Refinancing With A Specialist Lender

There are specialist lenders that focus on refinancing people with bad credit. Their guidelines are often more flexible than traditional banks, making approval easier. You will still have to meet their minimum requirements and usually pay a higher interest rate. Refinancing with a specialist lender for the short term could be a good strategy if you have severe problems with your credit file, such as paid defaults, that will remain in place for some years. Then, when you are eligible for standard loan packages, you can refinance with a major lender and get a cheaper interest rate and better deal. This is the best option if you are refinancing for a cash out, flexible policies or debt consolidation.

Becoming Eligible To Refinance With A Major Bank

You are eligible to refinance out of a non-conforming loan once you meet standard bank requirements. This generally means that:
  • You owe 80% or less of your property’s value (some banks consider up to 90% as well).
  • All your defaults are paid and no longer showing on your credit file.
  • You have full income evidence (some banks also consider low-doc loans).
  • You have made all of your repayments on time in the last six months.
We can help you find a specialist lender and refinance with a major bank once you are eligible. Call us on 1300 889 743 or enquire online, and we will let you know your options.

3. Consolidate All Your Debts Into The Mortgage

Adding all your debts to your mortgage refinancing loan is an excellent way of getting rid of debt quickly and efficiently. By consolidating all your debts into your mortgage, you can get a lower interest rate on the entire amount refinanced. This is because the interest rates on mortgages are generally lower than for other kinds of debt, such as personal loans, car loans, and credit cards. In this way, debt consolidation through mortgage lowers your expenses, increasing the serviceability of your refinance loan.

4. Apply With A Co-Borrower

If you’re refinancing with credit problems, one way to improve your chances of getting approval is to apply with a co-borrower who has a good credit score. A co-borrower is someone who applies for the loan with you and agrees to be held liable for repaying the refinanced mortgage if you default. When you apply with a non-occupying co-borrower, both your credit scores and assets are considered. Applying with a co-borrower can help increase your chances and get you a lower interest rate than if you applied alone.

5. Refinance With A Private Lender

Private lenders are mortgage fund holders or high-net-worth individuals who offer high-rate unregulated loans secured by either a second mortgage or a caveat – which typically prevents you from getting a home loan without the consent of the caveat holder. Since the annual interest rates from private lenders usually range from 2 to 6% per month but can o higher, so, they should be your last resort. Getting a mortgage from them for the shortest term possible and then switching to a bank once you meet the requirements should be the goal. Many banks will not accept a refinance application if the loan purpose is to refinance a private mortgage. However, if you have made your repayments on your mortgage with the private lender on time, we at Home Loan Experts can assist you with refinancing.

Get A Mortgage Specialist To Help Your Case

To execute any of the five strategies mentioned above, you need an expert mortgage broker like us to guide you throughout the process. Below are some of the ways the specialist brokers at Home Loan Experts can help you get a loan despite credit problems:
  • We have 50+ lenders on our panel, including specialist lenders that can help people refinance with bad credit. We know which lenders to turn to for different cases.
  • Our brokers maintain a strong relationship with BDMs of lenders, which helps our clients’ applications get approved. If you have a poor credit score due to a default or late repayment in the past, we may be able to get the lender to overlook it if your current repayments are up to date.
  • We will do all the paperwork and negotiate on your behalf to get you the best refinancing deal we can,even if you borrow from a specialist lender.
  • Our client success team follows up with all our settled clients. So, if we got you the mortgage and you want to change the loan structure, we can negotiate with your current lender on your behalf. This will save you the refinancing costs.

Construction Loan for Investment Property – Client Story

Kojo, Queensland


To obtain a bad-credit refinancing home loan.


Kojo, a 43-year-old mining engineer, recently separated from his wife of 15 years. As his ex-wife moved out with their two kids, he wanted to buy her out of their joint mortgage through refinancing. When they got their mortgage, Kojo wasn’t as involved in the application process as his ex-wife. But he did know that his credit score was required for refinancing.


In the past, Kojo had a perfect credit score, but at present, he does not have a credit score at all due to his ongoing part IX debt agreement worth $45,000. This became a massive problem for him while trying to refinance. Having a part IX debt agreement on your credit file means that you had a third-party clear your debts on your behalf as an alternative to bankruptcy. This record remains on your credit file for at least five years. Traditional banks do not accept your mortgage until two years after discharge from the debt agreement. Specialist lenders, too, require you to be discharged from the debt agreement for at least a day before applying with them. Not being able to come up with a solution on his own, Kojo sought expert help. That’s when he found our website and contacted us. We connected Kojo with one of our mortgage brokers specialising in bad-credit loans.


Here’s everything our broker and his dedicated team did to get Kojo’s mortgage refinanced:
  • Gave him the top two specialist lenders to choose from that best fit his profile.
  • Negotiated with the specialist lender of his choice to lower the interest rate offered.
  • Filled out his mortgage application on his behalf.
  • Checked and corrected the documents for his application. The client was inexperienced in filling out some forms, such as Verification of ID. He made major blunders frequently. If our loan processing specialist had not fixed these before submitting the documents, they would have delayed Kojo’s loan process by months.
  • Convinced the lender to approve the loan application without a credit score by proving Kojo had a stable income and was making regular repayments on his existing mortgage and part IX debt.
  • Presented payslips and bank statements that proved Kojo was a high-income earner.
  • Convinced the client to consolidate his part IX debt into the refinanced mortgage. This way, his repayments would decrease, and his loan serviceability improved.
  • Recommended a solicitor to help Kojo remove his wife from the ownership title once the loan was approved.
After the loan settlement, Kojo got full ownership of his $455,000 house, through the refinanced loan worth $373,500, which he also used to consolidate his part IX debt. Our broker got him the loan at an 83% LVR (Loan-to-Value Ratio) with a variable interest rate of 4.69% for a loan term of 30 years. Considering other specialist lenders were charging an interest rate of not less than 5.59%, this was a great deal.

Apply to refinance your bad-credit loan

We can help determine if a bad-credit loan is right for you. Call us on 1300 889 743 or enquire online to discuss your situation with one of our experts.