Can I Refinance a Home Loan with Bad Credit? Understanding Your Options

Can I Refinance a Home Loan with Bad Credit? Understanding Your Options

For many homeowners, refinancing can offer a path to better interest rates, lower monthly payments, or a shorter loan term. However, if you have a default or judgement on your credit report, you might be wondering if refinancing is even a possibility. The good news is that while challenges exist, there are steps you can take to improve your chances of refinancing successfully.

The Impact of Bad Credit / Defaults and Judgements on a Home Loan Refinance
Bad Credit, defaults and judgements are significant negative marks on a credit report and can stem from a variety of situations, such as unpaid loans or court judgements. These marks signal to lenders that there has been a serious lapse in financial responsibility, making them hesitant to offer new credit or refinancing options.

Serious Bad Credit Infringements Explained
A serious credit infringement is a step beyond a default and indicates that the creditor believes the debt will not be paid. This could be due to a debtor leaving their last known address without paying the debt or not responding to the creditor’s attempts to contact them. These infringements can remain on your credit report for seven years and can significantly impact your ability to borrow.

Assessing Your Situation
The first step is to get a clear picture of your credit report. Non Conforming Loans can help you understand the details of your defaults or judgements and the impact they have on your refinancing options. It’s crucial to ensure that all information on your report is accurate and up to date.

Taking Action to Mitigate the Impact
If you have a default or judgement, there are several actions you can take:

Seek Professional Help: Our team can refer you to credit repair law firms or advocates who can assist in negotiating with creditors to potentially have the default marked as paid or settled, which is viewed more favourably by lenders.

Understand the Timeline: Defaults and serious credit infringements can remain on your credit report for up to seven years. If your default is approaching this period, it might be worth waiting for it to age off your report before refinancing.

Consider Specialist Lenders: Non Conforming Loans specialise in loans to people with bad credit histories. We have relationships with various lenders and can help you find one that may consider your refinancing application despite a default or judgement.

Strengthen Other Aspects of Your Application: You can make your application more attractive by demonstrating strong income, stable employment, and a good amount of equity in your property. We can guide you on how to best present this information to lenders.

Understanding the Costs
Refinancing with a default or judgement on your credit report may come with additional costs. Lenders who are willing to take on higher-risk applications often compensate for this risk with higher interest rates or fees. It’s important to consider these potential costs when deciding to refinance your home loan with bad credit.
We will provide a transparent overview of the potential costs involved, ensuring you have all the information needed to make an informed decision. While the rates may be higher than standard loans, refinancing can still be a financially sound move if it aligns with your long-term goals and current financial situation.

Can you Relate?
Imagine John, who had a default from a missed credit card payment several years ago. With the guidance of Non Conforming Loans he was able to demonstrate his current financial stability and secure a refinancing option with a specialist lender that looked beyond his past credit issues.
In another scenario, Sarah faced a judgement from a small claims court. After working with us to settle the judgement and improve other aspects of her financial profile, she successfully refinanced her mortgage with a more favourable interest rate.

Personalised Support
We understand that everyone’s financial journey is unique. We provide tailored advice and support, ensuring that the refinancing solutions we find are customised to your individual circumstances. Our team will work with you to assess your situation, explore your options, and develop a plan to improve your chances of refinancing your home loan with bad credit.