Bad Credit Home Loans
Red Rock Mortgages has a market-leading selection of bad credit home loans and bad credit mortgages catering specifically to borrowers that do not fit traditional lenders' credit policies. We can offer very competitive bad credit home loan finance facilities at rates well below other lenders. Our specialist loan suite is ideal for borrowers with impaired credit, including:
- Paid or unpaid defaults or judgments.
- Mortgage or loan arrears
- Discharged bankrupts (min 1 day) (including Part IX, payment arrangements)
- Tax debts & unsecured debt consolidation (credit cards & personal loans)
- Company administrations
What are Bad Credit Home Loans?
Bad credit home loans are mortgages for borrowers that have what is considered an ‘impaired’, or bad credit history. These home loans are specifically tailored to accommodate the lending requirements of borrowers who have a credit history that is not ‘clear’. There are several credit impairments that will constitute a bad credit history and these include, defaults, judgements, Part IX or Bankruptcy, Company Administration and loan arrears. Below is a table of our most popular bad credit home loan products.
Bad Credit Home Loan Products
Full doc loan or low document loan with provision for credit impairments, no mortgage insurance. LVR and fees vary depending on nature of credit impairment.
*Minimum residential loan $250,000. LVR means Loan to Value Ratio. Credit impairments means, adverse credit report listings including defaults, judgments and bankruptcy history including loan arrears. Max LVR is 90% for purchase, 85% for refinance.
Common myths about Bad Credit Home Loans.
People with bad credit are not necessarily ineligible for a home loan or investment mortgage. Generally, borrowers seeking a bad credit home loan will require a larger deposit than those required for borrowers with a clean credit history. This is because people with bad credit are not easily insured, so lenders require more guarantees and evidence.
Traditionally, when borrowing more than 80 per cent of your property value, you are required to obtain Lenders Mortgage Insurance (LMI). Given that mortgage insurers are quite risk averse, obtaining LMI for applicants seeking a bad credit home loan is unlikely.
This means borrowers seeking a bad credit home loan will require an absolute minimum of 10 per cent deposit when using a lender that does not mortgage insure at 90 per cent LVR. You are more likely to require a 20 per cent deposit in order to avoid using mortgage insurance and therefore qualify for a refinance or purchase of a property.
Bad credit home loans can be provided for up to 90 per cent of a property's value in some cases, using a non-mortgage insured loan. However, rates are significantly higher than what is available at a standard lending ratio of 80 per cent.
How long do bad credit listings such as defaults & judgments stay on my credit file?
Your credit report will show all credit-related enquiries in the last five years. All defaults and judgments generally remain on your credit file, irrespective of whether or not they are paid, for a period of five years from the date they are listed. Bankruptcy information may remain on your credit file for up to seven years.
While it's important to remember that your defaults or judgements can be removed from your credit file, they don't stick around forever so don't stress when applying for a bad credit home loan.
Tips for bad credit home loan borrowers when applying for a mortgage.
When applying for a loan, applicants are always encouraged to review their individual credit history to ensure that there are no bad credit listings noted on their credit file. To do this, borrowers can obtain a copy of their credit report, from VEDA Advantage. This is highly recommended for 3 reasons;
- You'll know exactly what is on your credit report before applying for a mortgage.
- You may be able to pay or settle any unpaid defaults or judgements, or even have them removed, if they were incorrectly listed.
- With a current copy of your credit report, you can at the very least obtain an accurate loan proposal and receive relevant advice in relation to your bad credit mortgage options prior to making an application. In this way, you can make an informed lending decision before even filling out an application form
How to get a mortgage with a bad credit rating
Bad credit home loans are assessed on their individual merits. As each person's credit history and borrowing requirements are different, bad credit home loan options are risk-assessed and priced according to each borrower's unique credit history. The more severe the credit impairments, the higher the risk to the lender and therefore the greater likelihood that the credit available will be limited to higher-than-normal interest rates.
As a general rule, bad credit home loans are priced based on the following parameters:
- The age of credit history defaults listed on the applicants credit report (the older the better).
- Whether or not the defaults and judgments are paid, settled or unpaid at the time of application (paid or settled is far better than unpaid).
- The nature and type of the credit defaults or judgments (such as a telco, utility or financial institution default). Generally, telco and utility-related defaults are less severe than financial default listings.
- What LVR the bad credit home loan applicant is seeking (the lower the loan to value ratio, the lower the risk to the lender, therefore qualifying the lender for a lower interest rate).
- The employment standing of the bad credit home loan applicant (that is, what is the current employment situation of the borrower, and can they provide the required documentation?). Applicants with proof of income are considered low-risk and therefore are more likely to qualify for cheaper bad credit home loan options.
Why choose Red Rock for bad credit home loans.Unlike other mortgage providers, we specialise in assisting borrowers with a bad credit history which can vary from very minor credit impairments to discharged bankruptcy. We have access to niche and rarely available funding sources, ideally suited to assisting borrowers seeking a bad credit mortgage for investment or owner-occupier purposes.
We have helped hundreds of borrowers all over Australia obtain home and investment loans where other lenders have said 'no'. Loans can often be approved for applicants with a bad credit history at around the same interest rates for borrowers with no credit impairments. It's our expertise, our niche funding relationships and how we approach each separate instance that makes all the difference to our many happy clients. Talk to us today about your bad credit home loan options and your unique circumstances in complete confidence.Contact us for a personal individual assessment. We can provide you with fast and flexible access to cost-effective finance that may not have been possible with traditional lending institutions