How to refinance a home loan in arrears | Finder

Refinancing a home loan in arrears

Get a better deal on your home loan even if you're in arrears.

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ArrearscalculatorIf you haven't been able to keep up with your mortgage repayment schedule and have an overdue debt, your account is in arrears. Most borrowers fall into this situation when they run into some financial challenges and are unable to meet their financial obligations. This can affect any loans that you may want to apply for in the future, as well as your credit history.

One of the ways to help fix this situation is to consider refinancing your loan. This will see you extend the term of your home loan to lower your repayments, or simply refinance to get a more competitive interest rate, lower fees and better features.

Can you refinance a home loan which is in arrears?

It's possible to refinance your home loan even if it is in arrears, but depending on your credit file it might not be an easy task. Your options can be to refinance it with your existing lender, or move to a different lender.

Refinancing your mortgage can help you control the situation, though you may not be able to get this service from major banks or well-known lenders. Instead, you will need to contact lenders who specialise in bad credit lending, or a mortgage broker who handles similar cases. Your options, if you're eligible, might also be limited as you will not qualify for the lower interest rate home loans that are available (because your interest rate is a reflection of your riskiness). Refinancing may also mean an extension of the length of your loan term, which means you’ll be paying it off for longer than expected, with more interest.

You might also be subject to certain conditions including higher interest rates, Lenders Mortgage Insurance (LMI, this is charged if you are borrowing more than 70-80% of the property’s purchase price), and risk fees. All these are the new lender’s insurance against the risk that they are taking by assuming your loan.

Tips on how to be approved for a bad credit home loans

Refinancing with bad credit

Borrowers with their mortgage in arrears are considered to have bad credit, but so are those that have financial problems in the past. These days there are more loan options for those with bad credit, even if the penalty of these loans is higher interest rates and fees.

The best way to deal with bad credit is to minimise using your credit card and applying for other loans, and be diligent when it comes to paying off what you need to pay. A regular savings fund will give you a boost if you plan to refinance, as it shows you are being doing what you can to be financially responsible.

Being delayed on your mortgage payments is not the end of the world. There are things you can do to get back on track. Refinancing is one option, but before you do that, it might be a good option to talk to you current lender to see if they have options for you.

Speak to a lender about your refinancing options

Data updated regularly
$
years
Name Product Interest Rate (p.a.) Comp. Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment
Pepper Money Easy Near Prime Full Doc Home Loan
3.49%
3.77%
$995
$15 monthly ($180 p.a.)
80%
$673.79
Enjoy extra repayments with no penalties and a rate reduction if you make your payments on time for 12 months.
Pepper Money Essential Prime Full Doc Home Loan
2.35%
2.55%
$599
$10 monthly ($120 p.a.)
55%
$582.16
A low rate home loan which rewards those with a larger deposit.
Pepper Money Essential Prime Full Doc Home Loan
2.95%
3.15%
$599
$10 monthly ($120 p.a.)
65%
$629.46
A variable rate loan for borrowers with a good credit history. This loan has a 100% offset account plus split and redraw facilities.
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Compare up to 4 providers

What happens if your home loan continues to be in arrears?

The way lenders deal with mortgage in arrears vary, but the general process is pretty similar. Most lenders will send you a notice or a letter if you've missed a repayment twice in a row. You can respond by letting the lender know why you've fallen behind on your payments and when you can make your next due. If there's no response from you in any form, the lender will send you a default notice, which usually gives you up to 30 days to update your payments.

If you still fail to settle the payment, the lender will issue a statement saying that they will repossess your property. They will then apply for a writ or order for the repossession, and they will inform you of when this will happen. A 'Notice to Vacate' will be given to the borrower, and a sheriff will be sent to facilitate this, including changing the locks if necessary.

Any activity that deals with financial anomalies or difficulties will affect your credit rating, which then will affect any future loans that you may wish to apply for.

What should you consider before refinancing a home loan in arrears?

Refinancing to another lender is often the first option many take if they have a mortgage in arrears. Refinancing means getting a new loan to help you with your existing loan. Some people regularly refinance their homes, but some choose to do so when they’re having difficulties with their current one.

While this presents many opportunities for helping you get your finances back in order, it's a good idea to ask your current lender if they have other options for you. Most lenders have a ‘hardship team’ that is dedicated to helping borrowers who are having difficulty paying their dues by giving them better options with their payments. They can recalculate your loan and help you make plans for your payment so you won’t have to worry about defaulting or losing your property. This also applies to any loan that you have availed and are having difficulty keeping updated.

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8 Responses

    Default Gravatar
    cassieJanuary 25, 2018

    house is going to be repossessed unless refinanced. can you help with that

      Avatarfinder Customer Care
      JonathanFebruary 21, 2018Staff

      Hi Cassie,

      Thanks for your inquiry.

      I understand you are looking to refinance your home loan. Your chances of refinancing with a traditional lender would depend on the lender’s eligibility criteria but generally, if you’ve been in your current specialist home loan for a few years and you’ve kept up with your repayments, you may be able to refinance into a traditional home loan for a much lower rate. Otherwise, you may consider the lender above or speak to a mortgage broker who can take your personal circumstances into account and offer you a range of borrowing options.

      Before applying, please ensure that you meet all the eligibility criteria and read through the details of the needed requirements as well as the relevant Product Disclosure Statements/Terms and Conditions when comparing your options before making a decision on whether it is right for you. You can also contact the provider if you have specific questions.

      Best,

      Jonathan

    Default Gravatar
    SallyMarch 22, 2017

    Can you refinance a loan when the existing bank is about to foreclose

      Avatarfinder Customer Care
      HaroldMarch 23, 2017Staff

      Hi Sally,

      Thanks for your question.

      Yes, you can still refinance as long as you meet the eligibility requirements of your new lender. If you want to explore your options, please check the list of refinancing home loans on our website.

      Alternatively you can reach out to a mortgage broker who will take all your circumstances into account and offer you a range of lending options.

      I hope this has helped.

      Cheers,
      Harold

    Default Gravatar
    JennyApril 21, 2016

    How do i find a broker? My mortgage is in arrears due to a high interest rate of 7.30% and would like to try and refinance.

      Avatarfinder Customer Care
      MarcApril 22, 2016Staff

      Hi there Jenny,
      thanks for the question.

      You can compare lenders and brokers to contact for bad credit home loans in the table on this page.

      I hope this helps,
      Marc.

    Default Gravatar
    CharmaineApril 2, 2016

    Hi
    We have a home loan in arrears of $1800.00 and want to refinance at a cheaper interest rate as we are paying 8% for ten years.
    Are you able to assist us?
    Charmaine and Andrew

      Default Gravatar
      BelindaApril 4, 2016

      Hi Charmaine,

      Thanks for reaching out.

      On this page you can enquire with a lender that may be more likely to review your refinance application if your mortgage is in arrears.

      Alternatively, you can check out our refinancing comparison table to search for a better deal for your mortgage. If you enter in your current loan details and hit ‘calculate’, you’ll be able to see how much you could save by switching to each of the loans listed in the table.

      Your best course of action would be to speak to a mortgage brokerto discuss your refinancing needs. A broker will be able to draw upon their panel of lenders to find one that’s more likely to review your application given that your mortgage is in arrears.

      All the best,
      Belinda

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