Refinancing Your Home Loan When You Have Bad Credit

Get a better home loan deal even if you're credit impaired.

A bad credit report doesn’t always mean you’ll be declined by lenders for a refinance home loan.

While having a bad credit rating is not ideal particularly if you want to refinance, there are some specialist lenders that will still review your application.

However, you'll need to make a conscious effort to improve your credit rating and take control of your debt. This may involve demonstrating to the lender that you have enough equity or savings to borrow less than 80% loan-to-value (LVR) ratio.

If you're thinking of refinancing to secure a better rate, features or to consolidate debt, here are some steps to help you with the process.

Apply for a bad credit home loan today

Rates last updated October 17th, 2018
Loan purpose
Offset account
Loan type
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Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
$15 monthly ($180 p.a.)
Available for former bad credit borrowers who have had a clean credit file for the last 24 months. Available for purchase or refinance.
$15 monthly ($180 p.a.)
An online bad credit home loan for those who may have had some bad marks on their credit history.
$15 monthly ($180 p.a.)
Available for borrowers with bad credit history. Can be used for purchase or refinance even with negative listings on your credit file.
$15 monthly ($180 p.a.)
Self-employed borrowers can enjoy interest only options and flexible repayments.
$15 monthly ($180 p.a.)
A home loan which can be used for debt consolidation, purchasing and refinancing.
$15 monthly ($180 p.a.)
A loan designed for those who have negative marks on their credit file.
$15 monthly ($180 p.a.)
This loan considers borrowers with some negative credit listings.
$15 monthly ($180 p.a.)
An online bad credit home loan for those who may have had some bad marks on their credit history.

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How to refinance if you have bad credit

refinance home loanRefinancing with bad credit can be difficult so here are some tips to help you get started:

  • Get a copy of your credit file. Accessing your credit file will help you understand how you look from the lender's perspective. This will give you an idea of the things a lender will look at when considering you as a customer. You can see your current credit limits, number of credit cards that you have and any late payments which have been reported.
  • Take control of your debt. The next step is to be proactive about trimming any existing debt that you have. If you're having trouble meeting your credit card or utility payments, consider contacting your provider to negotiate a new payment plan to ensure that you pay your bills or repayments in full and on time.
  • Visit a mortgage broker. A licensed mortgage broker can discuss your borrowing needs with you in detail and help you with the application process. They will be able to draw upon their panel of lenders to find one that's more likely to review your application given your impaired credit status.
  • Speak to a specialist lender. Specialist lenders evaluate borrowers not on the number of defaults and the amounts of each of these defaults, but how long ago you made these mistakes. They recognise that you may have become credit impaired due to life events, such as divorce, illness or loss of a job, and are willing to offer loans to help you own your home and pay off existing debts.
  • Borrow less than 80% LVR. This avoids the need for Lender’s Mortgage Insurance (LMI) for high documentation loans and means you’re a lower risk to the lender. Try to show the lender that you have enough equity or savings to maintain an LVR below 80%.

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How to manage your home loan switch to avoid more bad credit

You need to know how to manage the bad debt you already have to avoid getting into the same situation again. To manage a bad credit refinance successfully:

  • Keep debt consolidation loans separate. It is possible to refinance your home loan to consolidate bad debts such as credit cards or personal loans so they attract the same low interest rate as your home loan. However, to successfully manage this sort of bad credit refinance, you should keep your refinance loan split so you make separate payments for your home loan and your consolidated debts. Otherwise, you'll be paying your credit cards and personal loans off over 20 - 30 years with your home loan which will drive the total cost with interest up much higher.
  • Don't rely on refinancing as an outlet. While you will be able to justify the entry and exit fees on refinancing a loan to consolidate debt or to move to a better home loan deal, these fees will add up if you continue to rely on refinancing as a way to manage your bad debt. It is recommended that you review your home loan regularly to ensure that you're getting a good deal, but refinancing to manage bad credit is not always an effective option.
  • Don't choose features that will tempt you. If you know you have trouble with managing finances, then features such as a line of credit, which allows you to withdraw up to the value of the equity in your home, may tempt you to spend more. Similarly, if the refinance loan you choose has free redraw facility you may tempted to withdraw the extra repayments.

There is no shame in asking for assistance if you have bad credit and need to refinance your home loan to better manage your finances. Just make sure your bad credit refinance mortgage will benefit you financially.

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Marc Terrano

Marc Terrano is a Lead Publisher at finder. He's been writing and publishing personal finance content for over five years and loves to help Australians get a better deal.

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6 Responses

  1. Default Gravatar
    sarahApril 6, 2014

    Hi Team at finder.com. we would like to know if your able to help us out. we would like to refinance but have amounts on our credit file under $1000 each. if we can refinance we are prepared to pay these out in full. we find it funny that you have fox symes as a recommendation for bad credit home loans as i have previously spoken with them and they have said that they dont do bad credit finance and cant help us. thanks sarah and scott

    • finder Customer Care
      MarcApril 7, 2014Staff

      Hi Sarah,
      thanks for the question.

      Unfortunately we don’t offer any home loans ourselves, but rather allow you only to compare different products available in the market. I’d recommend comparing the different bad credit home loans in the marketplace and then contacting any lenders who have products you’re interested in. You might also want to consider credit repair services.

      I hope this helps,

  2. Default Gravatar
    gumbaJanuary 25, 2014

    i got the pre approvel from a bank and then got declined because we fell behind on our home loan by 2 months christmas period , i will have the money to bring it up to date in next week,we have $150k equity in our home (valued at $250k) and would like to consolidate our credit card,cars and bike loan in total $90k..im lost to wich bank we should go to and to who would accept us

    • finder Customer Care
      MarcJanuary 28, 2014Staff

      Hi Gumba,
      thanks for the question.

      Unfortunately I’m not able to suggest specific lenders who you should apply with. I’d recommend contacting different lenders to find out about their debt consolidation loans and if you’re eligible to apply.

      I hope this helps,

  3. Default Gravatar
    paulJanuary 6, 2014

    We have sold our house and are buying another house the buying price is $327,500 applying for a loan of $85,000 have been knocked back from a default on a gas and electricity bill we were not aware of from 2010 it is paid can someone please advise best solution I have a broker how isn’t returning calls or replying to messages sent am today appreciate any assistance regards Paul

    • finder Customer Care
      MarcJanuary 7, 2014Staff

      Hello Paul,
      thanks for the question.

      I’m unable to give personal advice, but generally speaking there are some lenders who do grant loans to those with defaults on their credit file. It may be a good idea to carry out a search of these lenders, and compare them using their fees and interest rates. It may also be a good idea to seek the services of a different mortgage broker. You can compare bad credit lenders here.

      I hope that helps,

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