Wanting a mortgage but you have bad credit? Bad credit mortgages are possible to get nowadays, maybe not directly from your bank however, there is another option.
Your bank will not accept bad credit, even if you have banked with them for many years. It will be a straight “no” your application is declined and your dreams shattered. Good news is, bad credit mortgages are possible.
There Is Hope!
Non-bank lenders are able to look at your application, even if you have bad credit. While they may be more expensive than your bank, it may be the only way for you to get a mortgage loan approved if you have bad credit.
As a mortgage adviser, I speacialise in non bank lending and there are options for you.
Things happen in our past and we need to learn from it, move on and even start afresh by getting a home loan.
Past Defaults Will Follow You … But Not Forever
Bad credit from the past cannot be changed, but you can learn from it and make some smart choices that can change your future.
While these defaults from the past can follow you for years, it won’t be forever.
Defaults and other bad credit issues (both unpaid and paid) will show up on your credit check, but payment defaults only stay on your credit check for 5-years.
If you want to learn more you can sign up for the Pathway to Home Ownership course where these subjects are discussed in detail.
Bad Credit… Bank Will Mostly Likely Decline
If the bank is aware that you have bad credit, they will simply decline you without asking why.
Banks will not ask you what caused your bad credit nor will they try and understand your past situation, they will just decline you. It’s just bank policy.
Fortunately, while banks may be strict with those who have bad or impaired credit, there are some mortgage advisers out there that have experience and expertise to present your mortgage application to other non-bank lenders for approval. They will look at your application regardless of your past. In many instances, people with bad credit have been approved mortgages, it’s possible!
What Non-Bank Lenders Can Offer
Non-bank lenders are able to approve mortgages that banks would decline.
There are different types of non-bank lenders, ones that will offer long-term mortgages with reasonable interest rates, while the other are designed as short-term lenders to ‘fix’ a problem. In cases where a short term loan is used, your adviser should have considered how to get you refinanced to a long-term option at the end of the initial loan term.
Non-Bank Lenders A Good Option For Bad Credit
Sometimes life can throw curve balls and things may happen that is out of our control. In this day and age it is not common for people to have credit issues that could be deemed as “bad credit” or a minor hic-up.
Online, there are credit agencies like Veda Advantage (formerly Baycorp) that will be able to provide lenders with your credit information. This information stays on your credit record for 5-years even after paid.
While banks can treat you like a lower class citizen, some banks and the non-bank lenders have a better understanding of these issues and have mortgages designed to help you obtain finance and therefore stay on the property ladder. Some lenders have specific products designed to restore you to prime lending as you prove your credit worthiness with them and your credit history.
With Bad Credit, Will You Pay More?
It depends…
Sometime yes, sometimes no. If you can explain small credit impairments and convince the bank, they may offer you a standard mortgage, however, if your credit report is showing multiple defaults and collections, the the mortgage could be at a higher interest rate. Depending on the lender, there are often fees applied to a loan too.
If there are unpaid collections, current or recent mortgage arrears or overdue council rates then they will need to be addressed.
If your application is complicated for the banks they will often say “NO”, this will be a good time for you to get in touch with a mortgage adviser, they can make a huge difference. A mortgage adviser will work on a finance application and they will do everything they can to make it work as this is how they generally get paid – on success. They will go through an application and present it so the lenders can easily understand the issues and therefore be in a position to make a lending decision, which of course we would all hope to be an approval.
They will weigh up the options for you and sometimes may use a combination of a 1st and 2nd mortgage to get the best result for you.
Not all advisers have the expertise or experience required for this type of lending and therefore you should always look for non bank brokers who have access to a wide range of lenders and know how to assist you.
Often people just need to draw a line in the sand and get a fresh start!
Focus On The Big Picture
In life you sometimes need to take a long-term approach; whereas we all hope that issues such as bad credit are short-term.
Property can provide long-term capital gains so its often not a good idea to delay a purchase in cities like Auckland as the house prices have been known to rise at a pace that means you can struggle to get into the market.
It is often better to accept that you may not get the perfect mortgage today while you have some bad credit, but getting into the market may be more important and save you money in the long-run.
You may have some bad credit, but don’t let that stop you. Bad credit mortgages are possible!
If you need an adviser to speak to, you can contact me, I would love to help you.
