5 Tips For Getting A Home Loan With Bad Credit

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01 Jul 5 Tips For Getting A Home Loan With Bad Credit

Bad credit issues can make it hard for you to get a home loan, but that doesn’t mean it’s impossible. If you’re considering applying for a home loan with bad credit issues in the past, here are 5 tips to help you secure your dream home.

1. Understand your credit score

Your credit report is a complete history of your credit behaviour, which lenders use to determine your financial reliability. Your credit score is the rating that credit reporting bureaus use to indicate your level of creditworthiness.

A higher score represents a higher likelihood of responsible financial habits and lowers your risk in the eyes of a lender. A low credit score on the other hand, could signify to lenders that the borrower is a potential risk and consequently, your credit application may be rejected, or you’ll be charged higher interest rates.

Your credit report and credit score will give you a good indication of how lenders will likely view any credit applications you make. Because a credit score needs to be built up over time, if you haven’t borrowed money or used a credit card before, you possibly don’t have a credit score or you may have a low score.

To begin with, request a copy of your credit report by contacting one of the three credit reporting bureaus in New Zealand: Centrix, Illion and Equifax. Check your credit report carefully and report any errors you find. Be aware of negative credit information and the impact it has on your credit score. And take steps to repair your credit, like paying back your debt on time and in full.

2. Get your debt under control

Now that you know what your credit score is, it’s a good idea to get your debt under control and work on improving your credit score. Reduce your credit card debt by making regular repayments and not spending any further, and pay off your existing loans to clear that debt too.

For multiple outstanding loans or credit card debt that you’re struggling to get on top of, consider consolidating all debt into a single debt consolidation loan with an overall lower interest rate and/or lower repayments and/or more competitive terms. That will give you some breathing space and make it easier for you to pay back your debt on time.

Refinancing your existing mortgage to a Bad Credit Home Loan with Max Mortgages could be the answer if you’re facing significant debt and a mortgagee sale of your property. In some instances, it may be possible to roll all of your debt into your Bad Credit Home Loan to simplify your finances further and get your debt under control. To know more about Bad Credit Home Loans, please check out some common reasons why people consider a Bad Credit Home Loan and how Max Mortgages can help.

3. Save a bigger deposit

Loan to value ratio restrictions mean home buyers need to save a sizeable deposit. But those with bad credit issues may need to work harder to save an even bigger deposit.

That’s because the bigger your deposit, the less you have to borrow, and the more equity you have in your house. And that means less risk for the lender. In fact, a bigger deposit could help push your mortgage application over the line.

If you are a first home buyer, take a look at these deposit options for first home buyers which could help you get into your own home sooner.

4. Know your budget

Securing a mortgage – even with bad credit – largely comes down to serviceability – your ability to repay your home loan and maintain your ongoing expenses without causing financial hardship. The amount you may be able to borrow will be directly linked to your net income and living expenses.

To find out how much you may be eligible to borrow, consult with one of our experienced Mortgage Advisers who can take a look at your income, living expenses and other factors that impact your serviceability, and help find a repayment plan that fits your budget.

5. Consider non-bank lenders

When it comes to applying for a mortgage, some borrowers don’t meet banks’ strict lending criteria and their application may be turned down. Those with bad credit in particular may struggle to secure a home loan simply because they don’t tick all the right boxes.

That’s where non-bank lenders come in: with more flexible lending criteria compared to traditional banks, non-bank lenders are often an alternative for those who have previously been turned down by a bank, first home buyers included.

Often non-bank lenders can be a great solution for borrowers who have credit issues – it allows home buyers a chance to get onto the property ladder and build a good repayment history – and credit score – and equity in the property. In addition, if you already have a mortgage but are falling behind on your mortgage payments, non-bank lenders could be a good stepping stone in your journey to get your finances back on track and help keep your property.  When your situation changes, we at Max Mortgages may also be able to help you refinance your mortgage into a better deal with one of the main banks.

Interest rates with non-bank lenders can be quite competitive, and broader lending criteria makes it easier for those with bad credit to get a home loan.

Max Mortgages’ advisers work closely with all main banks and many non-bank lenders, and can help you find the home loan that best suits your needs.


To find out more about options for a home loan with bad credit, give us a call on 0800 ASK MAX (0800 275 629) today! Our team of Mortgage Advisers are experienced at handling all aspects of bad credit finance and helping our customers arrange home loans NZ wide, and have been very successful in helping many first home buyers – and existing homeowners – with bad credit home loans.

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