Got Bad Credit? Considering How To Refinance Your Home Loan?

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31 Aug Got Bad Credit? Considering How To Refinance Your Home Loan?

Mortgage refinancing can be a smart financial move for homeowners looking to lower their interest rates, access equity, consolidate debt, or adjust the terms of their home loan. While you may have to jump through a few extra hoops to get mortgage refinancing with bad credit, the good news is there are still options. Take a look at some of the reasons why homeowners choose mortgage refinancing, and how to refinance NZ home loans with bad credit.

Reasons to refinance with bad credit

Having bad credit can make it harder to get home loan approval when you refinance, but that doesn’t mean it’s impossible. Many Kiwis choose mortgage refinancing for:

  • Lower interest rates: With bad credit, you may have initially secured a mortgage at a higher interest rate because of the perceived risk of your loan. However, if your credit score has improved since then, mortgage refinancing could allow you to replace your existing mortgage with a new one with a more favourable interest rate, which would reduce your mortgage repayments and save you money in the long run.
  • Improved credit score: By refinancing your mortgage with a more affordable mortgage repayment amount, you would be able to make mortgage repayments on time and in full. This allows you to demonstrate responsible financial behaviour to lenders, which, over time, boosts your credit score and allows you to access more favourable interest rates and terms in the future.
  • Access home equity: Mortgage refinancing enables you to tap into your home’s equity, which is the difference between your property’s current value and the remaining balance on your mortgage. Equity provides access to funds you can use for home renovations, educational expenses, a holiday, or even starting a business. By using the equity wisely, you can leverage your home’s value to improve your financial situation.
  • Debt consolidation: Refinancing your mortgage provides an opportunity to consolidate high-interest debt, such as credit card debt, by tapping into the equity in your home and increasing your home loan size to pay off those debts. Debt consolidation can help simplify financial obligations and potentially secure a lower interest rate and or repayment.
  • Flexible loan terms: Mortgage refinancing allows you to tailor your home loan to better fit your current needs and financial goals. For example, you may choose to refinance to a longer-term fixed interest rate to provide you with more stability in knowing how much your mortgage repayments are going to be for the foreseeable future. Or you may decide to refinance and shorten your loan term to pay off your home loan faster.

How to refinance with bad credit

If you’ve struggled with a bad credit score due to financial hardship or a missed payment in the past, it’s helpful to know that there are still options for mortgage refinancing. Follow this step-by-step guide to refinance a mortgage with bad credit:

  1. Assess your credit situation: Before diving into the mortgage refinancing process, it’s important to evaluate your current credit situation. Request a copy of your credit report from a credit bureau and review it carefully. Pay particular attention to any errors or discrepancies that may be negatively impacting your credit score and report these to the credit bureau to have them corrected.
  2. Improve your credit score: Take the time to improve and rebuild your credit score. Be aware of the things that can negatively impact your score and avoid missing or making late repayments, applying for credit too often, or taking on more debt than you can afford.
  3. Explore your home loan options: Bad credit home loans are designed to help borrowers with bad credit, who may not otherwise qualify for a mortgage with a main bank. While the interest rates on a bad credit home loan may be slightly higher than traditional home loans, they are still competitive. Additionally, paying back bad credit home loans can help improve your credit score so you can refinance later to more favourable interest rates.
  4. Get help from a Mortgage Adviser: Work with an experienced Mortgage Adviser who can help you navigate the complexities of mortgage refinancing with bad credit, and connect you with the right lender so you’re assured of success.

Get expert advice about mortgage refinancing

Refinancing a mortgage is a big decision and it helps to have the knowledge and advice of a Mortgage Adviser like those at Max Mortgages. Working with a Max Mortgages Adviser will help you to make an informed decision about whether or not mortgage refinancing is right for you. Because we work with a range of mortgage lenders across NZ, including both banks and non-bank lenders, Max Mortgages Advisers can provide mortgage refinancing solutions to borrowers with bad credit. Get in touch with the team today to talk to a Mortgage Adviser about mortgage refinancing with bad credit.

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