Bad credit home loans

Don’t let bad credit come on your way! We can help you achieve your dream of owning your own home.

Bad credit doesn’t mean ‘No’ Loan

Sick of No? Savvy says Yes

If you’ve been rejected for a home loan – or fear rejection due to a poor credit history – you aren’t alone. Over 600,000 Australians carry a “high to extreme risk” of credit default, according to credit rating agency Veda.

The industry refers to bad credit home loans as non-conforming loans. They are sometimes called “sub-prime” loans, although not all bad credit home loans are sub-prime products.

To offset the risk lenders take, even if your bad credit past is behind you, you may have to come up with 20% deposit. This is also known as a 80% Loan-to-Value ratio. (LVR.) This is because lenders assess risk based on your credit report, which might take months or years to clear up.

We guide you through the process

The financial professionals at Savvy work hard to find the best and fairest loans for all our customers who’ve struggled with a poor financial history in the past. We believe everyone deserves a second chance. Unfortunately, you may have to contend with higher fees and interest rates due to the added on-paper risk that lenders and banks must take on.

Home Loans

See how can we help you with your bad credit home loan

Do you have bad credit home loan questions?

What is a bad credit home loan?

Bad credit home loans or bad credit mortgages are home loan products for people who have a poor credit history and have been rejected by banks for mainstream home loans. A poor or imperfect credit history will have a record of defaults (failure to pay bills or loan repayments), Part IX Debt Agreement, or bankruptcy.

Will I have to pay the highest rate possible?

It depends. Bad credit home loans are also known as “non-conforming loans” or “sub-prime” loans. As banks and lenders take on bigger risks, they ask for more interest. If you can demonstrate good banking habits, low debt, and/or stable employment, this will go a long way in reducing the interest rates on offer.

Will I be able to access offset accounts, redraw facilities, etc?

In many cases, yes. Many bad credit home loans will still have extras such as offset accounts, redraw facilities and other interest-reducing strategies available.

Will I have to pay the sub-prime rate for the life of the loan?

No. If your account is in good standing after two or three years, you can refinance your loan at a lower, or even “prime” rate.

Do I need a guarantor?

No. However a guarantor will help your application in cases such as getting a home loan as a single parent.

I have paid defaults or corrected mistakes on my credit history. Do I still need to apply for a bad credit home loan?

If you have paid off defaults and they still appear on your credit history, you may still have to apply for a bad credit home loan. Some defaults stay on your history for up to seven years. Ask your home loan consultant for more information.

Can I get approved for a bad credit home loan if I’m a first time buyer?

Yes. You can also apply for any first time buyer grants, if available in your state.

I have good credit but my partner/spouse has bad credit. How does this affect my standing?

If you are planning to borrow as a joint buyer, this can affect your ability to access prime rates. You can choose to buy as a single borrower; however, this will limit your total borrowing power.

What kind of evidence will help me gain approval for a home loan?

Bank statements, employment references/pay slips, residential histories, paid bills, tax returns and character references are all helpful when applying for a home loan.

I have been bankrupt or party to a Part IX Debt Agreement. Can I apply for a bad credit home loan?

If you are still party to these agreements/bankruptcy, you may not apply for a home loan. You will need to wait at least twelve months after the bankruptcy/debt is cleared before a lender or broker considers your application.

Can I consolidate my debts under a bad credit home loan?

Yes – under certain circumstances. Ask your consultant for more information.

Helpful guides to bad credit home loans

No loan is the same – use that to your advantage

Bad credit home loans aren’t one financial product – they are simply a class of similar products, in the same way SUVs or small cars are a class of products. There’s no such thing as one SUV, and the same goes for home loans. Depending on your circumstance, you may be eligible for a lower rate if you can demonstrate you’re a lower risk. This might be in the form of a higher deposit towards your home, good bank statements, a co-signer or references from your landlords or employers. They all help your case for a fairer interest rate. Over time, with proper conduct, you’ll be able to refinance at a mainstream rate and save more on interest rate.

Bad credit mortgage as debt consolidation

If you are approved for a bad credit home loan, you may be able to consolidate outstanding debts into one financial instrument (a fancy word for ‘loan’). If you are eligible, you can consolidate debts such as credit cards or personal loans, and mortgage payments in arrears under your current mortgage. Though mortgages are long-term loans, they have a significantly lower interest rate. It’s likely that you’ll pay less interest on your outstanding amounts compared to the usual rate. Sometimes credit cards will charge up to 20%p.a. on balances. This can avoid unnecessary defaults and further bad credit history. You should always ask a financial professional first if this route is right for you.

Honesty: the best policy

It may be tempting to “cook the books” to hide your bad credit past. As the saying goes, you can “run” but you can’t “hide!” Lenders and banks easily access credit histories. While they don’t show the full picture, they can make a bad impression worse if you aren’t forthright with your prospective lender. Above all, you need to be forthright with your broker or lender. You should never try to hide the truth, as tempting as it may be. Don’t be ashamed of your financial situation, many people (over 600,000 people, to be exact) have a similar story to tell. Your lender wants to help, so help them out by being as truthful as possible.

How do I check my credit history?

There’s a lot of mention about credit reports and credit histories online, so how can you check it for yourself? Australia has three major credit reporting agencies: Veda, Dun & Bradstreet (D&B) and Experian. Websites offering credit reports will have to apply for your report through one of these three agencies. It usually takes up to 10 working days to get a report back. These services are free – so be wary of sites “selling” that information to you! You will need personal info such as your drivers licence and previous addresses to verify your identity. This way you can find errors on your history and start correcting them.