Lenders are dubious of people who did not pay for their defaults or those who keep having ongoing credit problems.:
Small paid default: If you have a small default for less than $500 and it has been paid more than six months ago then we can help you borrow up to 90% and in some cases 95% LVR
More than one small paid default: If you have less than $1,000 in paid defaults from financial institutions (e.g. banks), and less than $500 in paid defaults from non-financial institutions (e.g. phone companies), then you can borrow up to 85% or possibly 90% of the property value.
Moderate paid defaults: If you have up to $3,000 in paid defaults we are able to help you borrow up to 80% of the property value with a prime lender, up to 90% of the property value with a specialist lender or up to 100% of the property value if you have a security guarantee from your parents.
Large paid defaults: Larger paid defaults from $3,000 to $500,000 can be considered on a case by case basis if you have a very good explanation which is backed up with strong evidence. We can lend up to 90% of the property value with a specialist lender.
Unpaid defaults: If you have any unpaid defaults then you can only borrow 90% of the property value with a non-conforming lender. Many lenders require you to pay the defaults before the loan is approved.
Judgments or court writs: If you have any judgements or court writs then you can borrow 90% of the property value with a non-conforming lender.
Part IX agreement:.
Mortgage arrears: These are ‘Missed Payments ( not just late ) on your home loan. The more the number of missed payments you have had in the last 6 months then the more wary lenders will be. Generally, banks will not refinance your loan if you have missed just one repayment!
Bad credit history: Adverse listings such as defaults, bankruptcy, judgments, court writs or too many credit enquiries on your Veda Advantage credit file can make your application with a standard lender difficult.
Lender credit history: Poor past credit history with the lender you are applying for. Lenders have a very long term memory for the customers that they have had problems with in the past.
Unpaid bills or tax: Outstanding bills such as council rates or late tax bills are a type of bad credit history that may not initially show up on your credit file but may be visible on the supporting documents you need to provide.
Company in financial trouble: If you are the director of a company that is in financial trouble, in receivership or liquidation ,then this can affect your personal credit history.
Over committed: If you have too many debts for your income or your total assets are less than your total liabilities then the major banks may assess you as being insolvent or beyond help.
They will assess your home loan application on a case by case basis and listen to your story as to what went wrong and why you need debt relief. And also whether your problems are now over or likely to be on-going. These lenders can often rapidly approve loans to meet deadlines from the creditors.
Generally if you are borrowing below 80% of the property value then you can get a cheaper interest rate than the normal non-conforming loan. The rate will, however be a bit higher than a standard loan.
For those of you who are looking to borrow over 80% or if you have had severely impaired credit histories then the rate can be quite a bit higher.
Bad Credit Low Doc Loan
You’ll need to provide limited proof of your income (read on to find out more).
You’ll need an active Australian Business Number (ABN).
The lender will ask for an explanation for your credit history.
If you meet these basic lending criteria then we can help to get your mortgage approved.
How the lender works out your rate:
Credit history: The better your credit history, the better your rate.
LVR: The higher the percentage of the property value that you are borrowing, the higher your rate. This is known as the Loan to Value Ratio (LVR).
ABN age: Some lenders charge a higher rate if your ABN is less than two years old.
Income evidence: The more income evidence that you can provide, the better your rate.
We may also advise you to make a few small changes such as getting a slightly larger deposit or paying one of your defaults ( if you can) so you fit into a different part of the lender’s risk matrix in order to get a better rate..
Age of the issue: How long ago was the credit problem? How quickly was it paid or settled? These details can matter.
Multiple issues: Several defaults at one time indicates a one off event but having the same defaults spread out over a few years indicates long term hardship.
Default status: Is the default current, paid, unpaid, cleared out or settled. Each is assessed differently but all can be accepted.
Bankruptcy & Part IX: How long ago was the problem? Are you discharged? If not, the new loan must pay out the bankruptcy.
Debt consolidation: How many debts are you refinancing into the loan? Are they being paid on time?
What went wrong?: Your story matters. Was it your fault? Have you learned from this experience? Will it happen again?
Lender policies for this Bad Credit loans vary significantly. Some will consider loan applications that others will not and they often price the same loans in different ways.
This is so that if you get into financial trouble in the future you can sell the property easily and why banks prefer units or houses in capital cities or major regional locations.
Vacant land, construction, hobby farms and small towns are considered to be a high risk security property so they are more difficult to finance, especially with a Bad Credit home loan.
If you are purchasing a property then the lender may look to see if you saved the deposit yourself or may look at your rental history.
Other loan purposes such as funding your business, buying investment properties or investing in shares are assessed based on their merits. but these may be more difficult.
Situations where someone CANNOT get approved :
You cannot afford the loan.
You cannot provide the required limited income evidence (see on this page).
The security property is outside the lender’s guidelines.
You do not have a big enough deposit.
You are currently bankrupt.
In these cases we may suggest that you make some changes to your situation before we lodge your application with one of our lenders
Poor Credit Rating Mortgage
So, your ‘Credit rating’ is your Credit File (eg from Veda) plus other information mentioned above.
Your credit rating is the category a lender places you in based on your credit score. Depending on the rating you are given, the lender views your loan application in different ways.
CBA for example has a five tier credit scoring system:
If you are given a credit rating of 1 or 2 then you are considered to be a great customer.
If you are rated as a 3, your loan will be assessed normally, based on its merits.
If your loan is rated to be a 4 or 5 then it’s very likely that your loan will be declined.
Other major banks such as Westpac, St George, NAB, ANZ and Bankwest have their own credit rating built into their loan assessment system. Because of this system, it is quite possible that you could pass with one lender but fail with another.
Different banks have their own, different formula for calculating a credit rating. For this reason each lender will view the risk of your application in different ways.
Example of how banks calculate your ‘credit rating”
Answering these questions for your own situation will give you an idea as to whether the banks would consider your application low, medium or high risk.
Answer each question, give it a score ( negligible risk =4/low risk=3/med risk=2/high risk =1) and divide the resulting figure by the number of questions. (12)
Applicant One- buys a home/with a partner/lived at current address for over 2 years/been in the same job for over 2 years/is in full-time permanent employment/only enquired for one credit this year/has a clear credit history/never missed a payment on any loan/is borrowing less than $300K/ has a deposit of over 40%/has genuine savings/ has over $100K in the bank/
This person would have a fantastic credit rating and would have no problems getting a home loan with any institution.
To buy an investment property – low risk
To refinance a home – low risk
To consolidate debt – medium high risk
To help fund your business – medium risk
No, I am applying for a loan with my partner – negligible risk
<6 months- high risk
>6 months but <2 years – low risk
>2 years- negligible risk
>6 months but <2 years – low risk
>2 years – negligible risk
I’m self employed for less than 2 yrs – medium high risk
I’m permanent full time or part time – negligible risk
I’m casual – medium risk
I’m a contractor – medium high risk
I’m employed by an agency – medium high risk
4 or 5 – high risk
3 or 4 – medium risk
2 or less – negligible risk
I am a discharged bankrupt – declined
I have more than 2 defaults OR my defaults are over $1,000 in total OR my defaults are not yet paid – declined
I have 2 or less defaults AND my defaults total to less than $1,000 AND they have been paid – very high risk
My credit history is clear! – negligible risk
Yes, within the last six months – very high risk
No, I never miss repayments – negligible risk
$300,001 to $500,000 – low risk
$500,001 to $750,000 – medium risk
$750,001 to $1,000,000 – medium high risk
>$1,000,000 – very high risk
Between 60% and 80% – low risk
80.1% to 85% – medium risk
85.1% to 90% – medium high risk
90.1% to 95% – very high risk
95% + – extreme risk
I have more than 5% of the purchase price in savings – low risk
I have 3% of the purchase price in savings – medium risk
I have no savings – high risk
I have equity in an existing property – negligible risk
>$100,000 – negligible risk
>$25,000 – low risk
$0 to $25,000 – medium risk
I own nothing! – medium high risk
I own nothing and I am on an income over $100,000 – very high risk
My liabilities are more than my assets – declined
Traditional lenders such as the banks are unlikely to consider your application, even if you have a good reason for the blemishes on your credit file.
We use a unique approach to find the most suitable lender for your situation:
First, we look to see if we can find a prime lender such as a major bank that would rate you favourably.
Second, we will look for non-conforming lenders or specialist lenders that can consider your application.
We will then compare the loans available from them and come back to you with two or three more competitive mortgages.
In the past, Veda did not have any score on your credit file. They merely provided to lenders a list of loans you have applied for along with ‘black marks’ such as defaults.
Nowadays Veda has their own score on your credit file, known as your Vedascore
It is the lender that then uses this information to give your loan a credit rating which is used to categorize you as a good or bad borrower.
Their attitude is that you have never had a loan before so you represent a higher risk.
They may decide that you should prove yourself with a small commitment such as a credit card before they will approve a home loan for you. Once you have a 6 month credit history then you are often easily able to borrow with most lenders.
Beware of being labelled a “credit junkie”, it is better to have one or two credit cards that are paid on time then to have too many debts as you will be seen as someone that cannot control their spending.
In the past if you have a track record of perfect payments on a car loan with Westpac then generally Westpac would give you a higher credit rating than a bank such as ANZ or NAB that you have never had any history with.
However as of 2014 all lenders have access to this information via your credit file with Veda Advantage, even if you have never had a loan with them.
Just as you would not lend money to people you do not know, banks are more wary in lending to people that they have no positive dealings with in the past.
Never be overdrawn.
Always have a healthy balance (i.e. not running out of money prior to pay day).
Few ATM withdrawals from pubs and clubs.
Be open for at least 6 months.
Generally have an increasing balance.
How you use your bank account is combined with the information on your credit file and information on your application form to create your credit rating for your loan application.
This means that the overall risk of your application has been assessed by their computer system and has been deemed to be too high.
Did you know that not every lender will rate your application? If you have been declined for no apparent reason then we can often apply with a lender that uses a common sense approach to loan assessment.
Of course if you aren’t credit worthy then you can’t get a loan, however if you feel that you should have been approved then consider talking to us.
Your credit report is basically a history of your financial activity in the past and is one of the main factors in determining whether your application for a loan will even be considered by the banks!
The lenders’ policies have become stricter which means that even the smallest credit issue can be the difference between an approval and a decline.
If you fix/repair your credit file prior to applying for a home loan then the lender will not be aware about the credit issues that you have had in the past and will approve your loan application as if you have clear credit.
Missed / Late payments on your bills.
Inability to pay due to loss of employment, divorce, illness, and one off events.
Disputes with credit providers.
However, you will be surprised to know that a number of defaults and judgments are listed incorrectly because the required steps were not followed or the details of the default are incorrect.
Therefore you should be aware of what is recorded in your credit file and seek professional help to remove any mistakes..
Therefore you should fix any ‘black marks’ that are listed on your credit file through a credit repair service. There are credit repair experts that can help you clean your credit file so that you can be eligible for a home loan.
You will get a lower interest rate on a new loan and credit card.
You have a higher chance of getting an instant loan approval by the banks.
Your overall repayments will be reduced.
The upfront and ongoing fees and charges by the lender will be reduced.
The accuracy of your personal information will be improved.
Crossed or linked files
And many more
Besides removing incorrect information, your credit file should be regularly updated to reflect the payments of defaults and arrears.
Once you get these black marks removed from your credit file then your credit score will improve which would make it easier for you to apply for a home loan and to get it approved.
Debt Consolidation Loan
Because of this, lending criteria are as follows:
You must have:
Made your home loan repayments on time for the last 6 months
Made credit card payments on-time for at least 3 months
Made your personal loans on-time for at least 3 months
Have not missed any payments with the bank you are applying with
Show you are in a good financial position and will be able to make the new payments
Have a good credit report
Have a stable employment and income history
If you can’t satisfy all or most of these points, you will be better advised to apply to a specialist lender.
This means that if you do not have Equity in real estate, you will not be able to consolidate your debt.with a consolidation loan.
If you do have equity and..
If you have clean credit and all of your repayments have been on time then you can borrow up to 90% of the property value.
If you have missed payments but, overall, are repaying your debts, you can borrow up to 80% of the property value.
If you have serious credit impairment or missing payments on all debts, you can borrow up to 75% of the property value.
Approval will also depend on your ability to prove that this will not happen again. Lenders will be concerned if you are living beyond your means or are experiencing financial hardship from which you will not recover We use various methods to explain to the lenders that this is a one off event.
The new loan will be lower than the summary of all the consolidated loans
Paying lower interest rates
Saving yourself money
There are two main types of equity loans :
The lump sum cash type: This is where you get a lump sum for an investment or particular project and start paying interest immediately.
The Line of Credit type: You only pay interest on the part of the loan that you have drawn down on .but you can refinance your entire loan to access the entire equity that has been built up on your home.
Home Loan With Defaults
The lenders assess your application depending on types of defaults that you have, how old they are, if they are paid and the total number and dollar value of the defaults.
Less than $500 in paid defaults: You can borrow up to 95% of the property value.
Less than $1,000 in paid defaults: You can borrow up to 90% of the property value.
Any unpaid defaults or larger paid defaults: You can borrow up to 90% of the property value with a specialist lender.
No more than $500 in defaults if you are borrowing up to 95%.
No more than $1,000 in defaults if you are borrowing up to 90%.
No more than two defaults in total for the one application.
You must have paid the default at least six months prior to the application.
If you are purchasing a property then you must have at least 5% in genuine savingsNo other policy exceptions are allowed.
You must have a very good reason for your impaired credit history.
Please not that these are minimum criteria and that meeting this criteria doesn’t guarantee that a bank will accept your loan. All applications are assessed on their merits and all banks will also credit score your application.
Ideally, all lenders prefer to approve low risk borrowers. Specialist lenders work in a different niche to the mainstream banks. They are happy to consider people with a bad credit history, however they are more conservative than the banks in other ways:
They accept more defaults than banks.
They will listen to your explanation for your bad credit history.
They can consider a low doc loan with less income evidence.
It is very difficult to finance vacant land.
Few specialist lenders offer construction loans.
Few specialist lenders accept properties over 5 acres in size.
It is your responsibility to make sure that all of your creditors have up to date contact information so that they can contact you if you are not making your repayments. In reality many lenders do not manage their customer databases well so some defaults are really the lender’s fault, not yours, however this can be difficult to prove. Defaults are lodged on your credit file with Veda Advantage and this information is accessed by lenders when you apply for a loan. A default will remain on your credit file for 5 years or 7 years if the reason it was lodged was because the lender couldn’t contact you. Paying the default doesn’t remove it from your credit file, however it does change the status to ‘paid’ which is seen more favourably by lenders.
Most mainstream lenders will not lend to people who have an impaired credit file, irrespective of the reasons.
Provide a default explanation letter.
Provide evidence to back up your explanation of the cause of your defaults.
Save up at least 5% of the purchase price and provide as large a deposit as possible., 10% or 20% would be better.
Pay any unpaid defaults and get the credit provider to mark them as paid on your credit file before you apply for a loan.
Apply with a lender that can accept borrowers with defaults.
Clean credit: No defaults, ever. – all banks/lenders
Near prime: Small paid default less than $500 paid over 1 year ago or several credit enquires .. Most lenders can approve a loan for you without any problems.
Below average: Paid default less than $1,000 paid over 6 months ago. Some prime lenders and major banks can lend you up to 80% on a case by case basis. Over 80% up to 90% or even 95% may be available in some cases depending on the situation.
Bad credit: More than $1,000 in defaults, all paid. You would likely have to apply with a specialist lender..
Serious credit impairment: More than $5,000 in defaults, some unpaid. You must use a private, specialist or non-conforming lender.
A. Paid default
Paid in full. Your credit file will state the date.
B. Settled default
A default is listed as ‘settled’ if you have come to an arrangement with the lender to pay some of the amount owing in return for the lender not pursuing the remaining debt.This is seen more favourably than an unpaid default, although it is not as glowing as a default that has been paid in full.
C. Current defaults
A default is listed as ‘current’ if you have paid the overdue amount and the account is still open. For example, if you had a default lodged on your file due to a credit card, pay the amount owing and then continue to use the card, it is listed as ‘current’ These defaults should be viewed the same way as a paid default. However, inexperienced credit managers think that ‘current’ means ‘unpaid’ and may accidently decline your loan.
D. Clearout defaults
A default is listed as ‘clearout’ if the lender has tried to contact you several times and has been unsuccessful. Clearouts will remain on your credit file for seven years instead of five years like other defaults. In many cases the reason the lender cannot find you is because you have been overseas or have moved address and have not informed the lender. Regardless of the cause, this is seen as the borrower ignoring their responsibilities. Lenders are extremely careful when considering a loan for someone with a ‘clearout’ default..
Loan with Mortgage In Arrears
Minor late payments: You can borrow up to 80% with a major lender or 90% with a specialist lender.
Up to two missed payments: You can borrow up to 80% of the value of your property with a specialist lender.
The lender is taking legal action: You can borrow up to 75% of the value of your property with a specialist lender, however you must prove that you are no longer in financial trouble.
A missed payment is a payment that you completely missed and never made up.
A late payment is one that you did not pay on time but did eventually make up the repayment.
If you have made several late payments or have missed payments on your mortgage then it is likely that you will find it hard to apply for a loan through the major banks and lenders.This is because they are able to see the arrears in your mortgage and do not want to approve a loan for a borrower who does not have the capability to make regular repayments on time.
High LVR over 80% – generally 2 missed payments
Low LVR under 80% – generally 3 or more missed payments.
Some lenders tend to take action faster than others depending on their hardship policy. It is important to talk to your lender and work with them. You should also look for an exit strategy such as selling your home, refinancing or consolidating your debts.
Tax Debt Mortgage
Security: You must already own real estate which can be used as security for the loan.
85% LVR: The tax debt plus your current mortgage must be less than 85% of the value of your property when combined.
Late repayments: If you are overdue with your repayments or have a bad credit history then you must have a reasonable explanation.
Income evidence: You must be able to prove that you can afford the new mortgage using payslips, BAS, tax returns, bank statements and/or an accountant’s
Lenders will want to know the reason for your tax debt
Lenders may view your situation differently depending on the cause of the tax debt. Some possible causes are as follows:
Accountant error: More lenders will be accessible to you since this shows irresponsibility on someone else’s part and not yours.
Tax returns not lodged: If you have not lodged your tax returns on time then banks will perceive you to be less reliable with your commitments and will take this into consideration while they evaluate your loan application.
Large Capital Gains Tax (CGT) bill: a borrower with a debt due to CGT is viewed more favourably than those who have not attempted to pay the tax at all. It is usually a one off event as opposed to an on-going issue and thus the lenders are more forgiving.
Sign of bad character: If people often fail to lodge their tax returns with the ATO or fail to make the payments on time it shows a lack of intention to repay their debts in general.
Sign of financial distress: Applying to refinance your tax debts already signifies an unstable financial position. Banks are concerned that you may be experiencing financial hardship and won’t be able to repay your debt to them.
Repeat problems: Banks have learned that people with tax debts have a higher chance of having another tax debt in the future or other financial problems.
Security concerns: If a property is sold then the bank’s mortgage will normally be repaid before the tax debt. However there are some instances when the ATO may make a claim from the sale proceeds of a property and take payment before a bank. In this case the bank may make a loss.
Court Write Home Loan
The larger the deposit, the better chance you have in getting your loan approved.
The court writ should have been be paid If the court writ is unpaid then you may be required to provide a good explanation
Judgment Home Loan
You can borrow up to 90% of the property value.
You must provide a written explanation for your judgement.
Some lenders will require you to pay the judgment if it has not yet been paid.
Mainstream lenders are very unlikely to consider your application even if you provide full evidence of what has happened.
Shows that there has been legal action which raises the possibility that there may be other legal action going on.
This is overall a very high risk, and will affect your credit score.
Judgments are worse than defaults because they are court orders
Part 9 /IX -Debt Agreement Home Loan
You can borrow up to 90% of the property value.
You must have 10% for the deposit plus fees, stamp duty etc., so around 16% of the purchase price in total.
If you have a larger deposit then you may qualify for better bank interest rates.
If you have not finished paying off your Part IX debt agreement then you cannot qualify for a home loan.
My credit file no longer shows my Part IX
You MAY now be able apply for a standard mortgage at standard interest
If you are currently in or have previously been in a Part 9 debt agreement then it will show up on your credit file and the banks are able to access this information when assessing your loan application.You MAY be accepted by some of the smaller banks if:
you have completed the agreement more than 12 months ago;
and are borrowing less than 80% LVR (of the property value) You have a very good reason for being in the debt agreement in the first place;
The reason must be substantial enough to justify the agreement – such as a major illness – otherwise the bank will simply decline your loan. You must also prove that after the agreement you have made all of your rent payments on time, have saved some money on your own and have not had any more credit issues.
If you do not satisfy these points, a specialist lender may still be able to accept you. .Specialist lenders are more flexible in the way that they assess your loan, however they will charge a higher interest rate to compensate for the higher risk of your loan.
However, you cannot get a home loan to purchase a property during a Part 9 Agreement.
Part X Personal Insovency Agreement Home loan
If you have entered into a Part X or Part 10 Personal Insolvency Agreement then the same lending criteria will apply as if you had been in a Part 9 Debt Agreement.
Part 9 Debt Agreement is regulated by the Insolvency & Trustee Service of Australia (ITSA), a Federal Government body. Your name will be listed on the National Personal Insolvency Index (NPII) and will not ever be removed.
Negotiating a system of periodic payments out of your salary which is set at a level that you can afford.
Having a moratorium arranged which is a temporary suspension of paying your debt.
A transfer of some of your property from you to your creditor in full or part payment of your debt.
Having an agreement with your creditor to pay less than the full amount of the debt that you owe.
You must also meet the other requirements under the Act including:
You must not have previously entered into a debt or bankruptcy agreement in the past ten years
After tax income of less than $66,284.40
Unsecured debts of less than $88,379.20
Property that would be divisible among creditors if the debtor were bankrupt, valued at less than $88,379.20.
Please note -these figures are subjected to change)
Who the administrator is and how they will be paid.
If property is going to be sold – you must specify exactly what will be sold and transferred.
Form must be lodged with the Insolvency and Trustee Service Australia (ITSA).
Creditors will then have a meeting and either accept or decline your debt agreement proposal.
If accepted: The agreement binds the creditor and they can no longer take action against you for recovery of unsecured debts. Administrator pays the creditor on your behalf.
If declined: You are entitled to re-submit your proposal and make changes. Otherwise, you may consider a Personal Solvency Agreement (Part X), or filing for bankruptcy.
If your circumstances change after you have entered into the agreement, you can apply to have the agreement varied.
When will I be successfully discharged from the agreement?
When you fulfil your obligations under the debt agreement.
If you absolutely can’t pay your bills and can’t see any improvement in the foreseeable future, a debt agreement can be a good solution to solving your financial woes and has many benefits!
Once your debt agreement is accepted, creditors cannot further recover any debts from you.
The interest on your loan/credit is frozen.
You are not subject to the restrictions that are imposed during bankruptcy.
You can continue to maintain your income
Reduce the stress and financial burden in your life
You can continue to maintain your income in some circumstances.
Discharged Bankrupt Home Loan
You have a 20% deposit/Your loan is for no more than 80% of the property value.
We MAY be able to help you borrow up to 90% of the purchase price of a property. This means you will need 14% to 16% of the purchase price to cover your deposit, stamp duty and Lenders Mortgage Insurance /LMI
You can provide evidence that you now pay your bills on time, e.g. a rental history.
You can provide evidence that the bankruptcy was a one-off event that was not your fault.
You have been discharged for a particular period of time, e.g. one year.
Undischarged bankrupt: We cannot assist you with a home loan if you are currently bankrupt.
You must meet standard Low Doc criteria such as provide limited income evidence in the form of BAS, an accountants letter or business bank statements( More information see Low Doc Home Loans) and have a reasonable explanation for your past credit history.
In plain English you are discharged from bankruptcy when you are no longer bankrupt and are no longer required to have limited assets and no overseas travel. However the bankrupt estate continues and the now ex-bankrupt still has an obligation to cooperate with the trustee.
From a finance point of view it means that you are now able to apply for credit again.
Save yourself the disappointment of approaching the major banks – you’ll find that none of them can approve your application while the bankruptcy listing is still on your credit file.
Refinancing a Bad Credit loan
You owe 80% or less of your property’s
All of your defaults are paid AND are no longer showing on your credit file.
You have full income evidence (low doc loans may be available in some cases).
You have made all of your repayments on time in the last 6 months.
If you have a loan of $500,000 at a rate of 8% then you are paying $3,689 per month whereas on a rate of 6% you would pay only $2,998 per month!
Over 30 years the difference between the two loans is a whopping $248,785 in interest!
This is why specialist lenders are designed to be a short to medium term solution, the cost of the loan over thirty years is much higher than that of a bank loan. If you only keep the loan for a year or two then the loan usually makes sense, so your goal is to refinance as soon as you can.
However,there are some cases where exit fees may apply even if your loan was advanced after the 1st of July 2011. For example if your loan is NCCP unregulated or if you have a fixed rate loan you may be charged break fees.
Lenders never forget about one of their own defaults. For example if you didn’t pay a credit card with a particular bank then that bank is unlikely to ever approve a loan for you. Some lenders have cross referenced databases in which case they are unlikely to lend to you as well. Lenders will also remember the past conduct on any current loans or accounts that you have. For example if you have a mortgage and three years ago you missed many repayments then the lender may not approve a loan increase for you even though you now have a perfect repayment history. If you had a cheque account with a lender at a time when you had problems with your credit history then that lender is very likely to be aware of your past problems.
Refinancing from a Private loan
Refinancing a Bluestone Mortgage
Below are Bluestone’s exit fees as a percentage of the original loan amount:
Fixed for life / Ready Access option:
Year 1 – 3%
Year 2 – 3%
Year 3 – 2%
Capped for life / Split Rate loans option:
Year 1 – 4%
Year 2 – 3%
Year 3 – 3%
Switching between loans may be available subject to the underwriting criteria at the time.
If you switch from the “Fixed for Life” to the “Capped for Life” loan then you may be liable for a fixed rate break fee. Note that there are additional fees for this service
The above exit fees and costs are general figures and are subject to change. You should be aware of the costs involved before making your decision to refinance..
They also raised the interest rates on all of their existing customers’ loans to help pay for their higher funding costs. As a result of this Bluestone’s interest rates are not competitive.
Bluestone was a leading financial services business which was established in Australia in 2000. They were quite a successful lender and expanded rapidly, even being recognized by Business Review Weekly (BRW) as one of the fastest growing companies in Australia.
Unfortunately their ability to fund loans was compromised by the sub-prime crisis. In 2012 they returned to the market with a range of specialist loans.
Bluestone is owned by a number of leading institutional investors such as Bank of Scotland International and Crescent Capital Partners, however the group operates two core divisions:
- Bluestone Servicing
- Bluestone Capital Management
Bluestone Servicing offers a range of portfolio management services to third parties such as Bond investors, the banks, trustees and administrators including:
- Core servicing (customer and loan administration)
- Special servicing (collections and arrears management)
- Standby or backup servicing
- Trust management
Over the years Bluestone Servicing has developed a technology platform that allows multiple portfolios and asset classes to be managed on a single platform. This enables a flawless and accurate transfer of portfolios from third party systems.
Bluestone Capital Management was founded in 2008 and specializes in the acquisition and management of portfolios of loans, particularly under-performing and non-performing loans to consumers.
Portfolio sales can be particularly attractive to vendors looking to cap their exposure and either release capital, or reduce the risk that further capital will be needed to support under-performing loans.
On behalf of institutional and retail investment, Bluestone Capital Management draws on its extensive organisational experience in credit analysis, financing and management of receivable portfolios.
Refinancing a Liberty Financial Mortgage
Rebatable Termination Fee (RTF) – $0 for Star / Nova loans. Private loans attract a fee of up to 4% of the original loan amount which is due if the loan is not paid out at maturity or is paid out early. Note that NCCP regulated loans (excludes private loans) set-up after the 1st July 2011 do not have an RTF.
Discharge Fee – $395 (plus legal fees) is payable when a discharge is requested, whether it proceeds or not.
Break Fee – Applicable to fixed rate loans only. Please call Liberty Financial for a quote.
If your loan was advanced before the 1st of July 2011 then there may be additional exit fees not listed above.
If your credit history has improved and you have a proven history of making repayments on time, then you may qualify with a major bank or with Liberty’s lower rate “AAA” mortgage.
Liberty Financial is a highly regarded and well established financial services group, backed by global banks such as Deutsche Bank, Credit Suisse and the National Australia Bank.
Liberty was founded in Australia in 1997 and introduced specialist lending to our country. Their lending policies recognize good people who are not being serviced or being serviced poorly by traditional lenders.
Refinancing a Pepper Mortgage
Like any non-conforming lender, Pepper’s loans have a higher interest rate and risk fee than standard banks. As a borrower, you want to refinance your Pepper loan as soon as all your defaults are clear and you are eligible for a home loan with a standard lender.
Pepper is a non-conforming lender who specialises in applications from people with bad credit, previous bankruptcies, discharged part 9 agreements, and mortgage arrears.
They are aggressive in their pricing for the non-conforming market and in some cases our mortgage brokers use Pepper as the stepping stone to a cheaper lender.
Established in 2001, Pepper have a strong background in residential mortgage finance.
Funded by several banks and institutional investors, Pepper have the required funding to stay competitive.
Pepper specialises in providing solutions for customers that cannot meet the credit guidelines of the major banks. They are one of the few lenders that accept high risk customers.
Refinancing a La Trobe Financial loan
La Trobe Financial is a specialist lender that has been operating since 1952 and has been recognized for its innovation and stability through many financial crises.
Their funding model is different to other lenders in that they obtain most of their funds from investors rather than from banks.
La Trobe mortgages are only designed to be short term loans. In many cases La Trobe cannot negotiate significantly reduced interest rates for their borrowers even when their credit history is clear, so in most cases it is best to refinance.
La Trobe mortgages that are NCCP unregulated may be subject to exit fees, please refer to your original loan offer for the full details.
Refinancing a MKM Capital loan
MKM Capital is a specialist lender with its own private funding. This gives MKM the flexibility to have their own lending policies and unique products.
They specialize in lending to people with serious credit impairment that may not be considered by other bad credit lenders. Their loans are usually designed to be kept for between six months and a year before being refinanced.
MKM Capital’s interest rates are significantly higher than the banks. If you can qualify for a bank loan then you should refinance as soon as possible.
Liquidated Company Mortgage
Your income comes from a source other than the insolvent company.
You can prove your income your income.
Your company is not currently in external administration
Loans to refinance directors’ guarantees or debts are considered.
You have at least a 10% deposit./you are borrowing no more than 90% of the property value.
You can do this in several different ways:
If you now have a job, you can provide payslips.
If you have other businesses, then you can provide tax returns or financial statements.
If you have other businesses, and cannot prove your income with full financials, then we can consider a Low-Doc loan.
If your loan is predominately for business purposes and is for less than 65% of the value of your property, then we can consider a No-Doc loan.
If the liquidation is still in progress then a letter from the voluntary administrator may be required.
Defaults in your company’s name
Recovery of company debt against the director
Bad Credit Commercial Loan
Although most banks will not approve a loan, there are several specialist commercial lenders that can look past your credit file, focus on the future and assess you on your merits rather than just a set of inflexible guidelines.
Buying a commercial property
Borrow up to 75% of the commercial property purchase price.
Maximum loan size of $10 million.
Bad credit history, arrears and reduced income evidence are considered.
Purchases, investment and business loans are considered.
Low Doc AND Bad Credit
There are specialist lenders that help people who have low doc loans or who have a bad credit history, but what if you have both?
Believe it or not, some of our lenders can approve a low doc commercial loan for self employed borrowers with a less than perfect credit file. It isn’t always straight forward as you’ll need to prove how your situation has changed or prove an exit strateg. Your application will have to be presented well.
If you cannot prove your income then No Doc commercial loans known as an asset lend may be suitable.
There are also some types of bad credit which do not show up on your credit file:
- Your commercial loan is in arrears
- Breaching the terms of your business loan
- Not paying the loan off at the end of the term
- Overdrawing your business bank account
- A past problem with a particular bank