A default won’t always mean a decline!
- Home loan type: bad credit home loans, Equifax score, credit file, unpaid default, first home buyers, gifted deposit
- Customer goal: To get approved with an unpaid default listed on their credit file.
- Loan amount: $509,000 (95% of the property value).
Siblings Hanan and Nbhanie were both in their 20s when they decided they wanted to move out of their parents’ place and buy their own home.
Luckily, the siblings got on well with each other and had saved up a decent deposit.
They even got a little help from their parents who gifted them part of the deposit.
It looked like they were all set to get a home loan but there was just one major problem.
Nbhanie had an unpaid default of $1,324 with Optus Financial Services.
This default was listed all the way back in 2017 when he switched service providers.
As a result, his Equifax Score had taken a beating and was now sitting at 475.
In Australia, 550 is considered an average score so Nbhanie was just below this benchmark.
Major lenders would not touch their application as the default was not older than 24 months and they were borrowing more than 90% of the property value (90% LVR).
The brother and sister learned that there were non-conforming lenders that specialised in bad credit home loans but they would have to pay an interest rate as high as 6.78%, much higher than a borrower with a clear credit file.
Other than Nbhanie’s unpaid mobile phone default, they had a perfect credit file and repayment history.
They needed to explain why it was a one-off mistake.
That’s when they decided to approach a mortgage broker.
This was perhaps the best decision they made.
Home Loan Experts mortgage broker Nirayu Shakya got the call.
After completing an initial assessment, he quickly identified three potential ways to move this forward:
- Proceed with a non-conforming lender and pay a higher interest rate, which was the easiest option.
- Go to a credit repair firm to have the default removed. This option would take about 3 months and tens of thousand dollars.
- Negotiate with Optus directly to remove the default, which was improbable but possible.
Nirayu recommended that they go with the last option because, in his own words, “it was probably the only win-win solution for all the three parties involved.”
Identifying the best solution was the easy part; dealing with the debt collection companies was a whole other ball game.
Nirayu spoke with Credit Corp Recoveries on behalf of Nbhanie about removing the default which they promptly rejected.
He then spoke with their manager and, after weeks of negotiations, they finally agreed on removing the default if Nbhanie paid it in full.
Nirayu even asked them for a written confirmation so he could provide this to the bank and get started on the home loan application. He received this on the same day via e-mail.
Nbhanie paid the amount in full and the default got removed within 10 days increasing his credit score from 475 to 825.
Any Equifax score above 700 is considered excellent.
As a result, Nirayu was able to get Hanan and Nbhanie approved with a major lender at a highly competitive rate that was below 4%.
The happy ending
The siblings were elated with joy when they found out they were approved.
They bought a beautiful 3-bedroom house in Mickleham (VIC) which featured a separate second living area.
If you need a mortgage broker to go above and beyond to get your mortgage approved, Home Loan Experts broker Nirayu Shakya is a great bet.
Give us a call on 1300 889 743 or fill in our free online assessment form to find out if you can qualify for a home loan with bad credit.