How To Refinance With A Judgment

Refinancing your home loan is a big decision but it’s a fairly straightforward process if you’re switching lenders after the fixed term and you have a mortgage broker to help you find the right product.

What can make the process difficult is if you’ve got a blemish on your credit file. Just having a hint of bad credit and you’re giving the bank all the ammo they need to reject your home loan application.

For Sydneysiders Rebecca and Elton, the only reason their refinance application was rejected the first time around was because Rebecca had a judgment recorded on her credit file for a past debt.

A debt judgment is recorded if you owe a debt to another party and there’s a court proceeding held by a magistrate to face the issue.

Here’s the story of how Home Loan Experts senior mortgage broker Matthew Trad helped them refinance their home loan.

The Story

Rebecca and Elton already owned a house and were already paying off a mortgage but when the opportunity to refinance at a better interest rate presented itself, they jumped at the chance.

The couple went to their bank in the hopes of refinancing and consolidating some debt that Rebecca had, including credit cards, a personal loan and a car loan, into one single monthly repayment.

By consolidating, it could not only make paying Rebecca’s debts a lot easier but it could make her debt payments a lot cheaper by paying interest at the home loan rate and not the higher interest rate usually charged on credit cards and personal loans.

Unfortunately, after a quick assessment, their application was declined outright because Rebecca had a judgment on her credit file.

A Clever Solution

There was actually no major issue with Rebecca and Elton’s situation other than the judgment on Rebecca’s credit file, which only amounted to roughly $1,000.

With most banks and lenders though, this was enough to see their application declined. There are only a handful of specialist lenders that accept applicants with bad credit but they tend to charge a higher interest rate.

Despite the setback, Rebecca and Elton sought the help of Home Loan Experts’ Matthew Trad, one of our most experienced bad credit specialists.

Matthew knew exactly how banks react to applications with bad credit, having worked for a number of years as the credit officer actually approving and declining home loan applications at a major Australian lender.

He was sure that in order to get the couple approved, they had to get their judgment removed before applying with another lender.

After taking the time to explain to them what a judgment was, Matthew recommended that Rebecca pay the judgment and then go to the court where it was issued and request a Notice of Discontinuance, a formal notice served on the defendant to end the active lawsuit.

He then advised them to call him after it was removed so he could line them up with a lender that would take a common sense approach to their case and so Rebecca and Elton could avoid applying with other lenders and only have their application declined each time.

Did you know that having too many enquiries on your credit file can have a major impact on your ability to get a home loan or finance of any kind?

The couple followed Matthew’s advice and Rebecca and Elton were able to get the judgment removed 3 months later. With Matthew’s help, they then got their refinance application approved and moved on to a better deal.

A Happy Ending

Rebecca and Elton were not only able to refinance to a better home loan, they also removed the judgment from their credit file and are now saving $300-$400 a month thanks to consolidating Rebecca’s other debt.

“If it hadn’t been for Matthew’s initial advice and support then I dare say we would still be stuck with the judgment on my credit profile with no hope of refinance,” Rebecca said.

Do you want to refinance but you’re not sure if your credit file will stop you from borrowing?

Speak with one of our expert mortgage brokers by calling 1300 889 743 or by filling in our free assessment form today!

Our specialist mortgage brokers know how to find the right solutions for people with bad credit.