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5 Effective Strategies To Refinance Mortgage
With Bad Credit

Discover 5 strategies to refinancing mortgage with bad credit

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Refinancing can be an excellent way to save money on your mortgage payments or tap into your home equity. However, if you have bad credit, refinancing can be challenging. A bad credit score can significantly limit your refinancing options, and you may pay higher interest rates and fees. Despite these challenges, refinancing with bad credit is still possible and can help you improve your financial situation in the long run. This guide will discuss five winning strategies to help you refinance your mortgage, even with bad credit. 

Strategy # 1 – Always Check Your Credit Score And Report

Before applying for a new loan, get a copy of your credit score and report from one of Australia’s three leading credit reporting agencies: Equifax, Experian or illion. You can get one free report per year from each agency or use a service like Finder or Credit Savvy to access your score for free anytime. Your credit score is between 0 and 1,000 (or 1,200, depending on the agency), reflecting your creditworthiness based on your repayment history, credit enquiries, defaults, bankruptcies and other factors. Your credit report contains more detailed information about your credit accounts, such as the type, amount, balance, limit and payment status of each. 

Checking your credit score and report can help you understand how lenders will view you as a borrower and identify any errors or harmful listings you can dispute or improve. If you find any errors, you can dispute them with the agency to have them corrected. You can also work on paying off outstanding debts and making timely payments on your bills and credit cards to improve your credit rating.

Strategy # 2 – Manage Your Debt And Improve Your Repayment History 

One of the most important factors lenders look at when assessing your loan application is your debt-to-income ratio, which is the percentage of your income that goes towards paying off your debts. The lower this ratio, the better your chances of refinancing approval. To reduce your debt-to-income ratio, you can pay off as much of your existing debt as possible, especially high-interest debt such as credit cards and personal loans. You can also consolidate your debt into one loan with a lower interest rate and more manageable repayments.

Another critical factor that lenders consider is your repayment history, which shows how reliable you are at making your loan repayments on time. You can set up direct debits or reminders to improve your repayment history to ensure you complete all payments. You can also contact your current lender and ask for a hardship variation if you struggle to meet your repayments due to financial difficulties.

Strategy # 3 – Compare Bad Credit Home Loans From Specialist Lenders

If you have bad credit, you may be unable to refinance with your current lender or a mainstream bank, as they tend to have stricter lending criteria and higher credit score requirements. However, some specialist lenders in Australia cater to borrowers with bad credit. These lenders may have more lenient lending criteria and be more willing to work with borrowers with less-than-stellar credit ratings.

Financing companies offer non-conforming loans designed for borrowers who don’t meet the standard lending criteria of traditional lenders. Non-conforming loans typically have higher interest rates and fees than conforming loans, but they may also have more flexible features and eligibility requirements. 

For example, some non-conforming lenders may accept borrowers with defaults, judgments, bankruptcies or discharged debt agreements on their credit report as long as they can demonstrate their ability to repay the loan and have sufficient equity in their property.

You can search for alternative lenders like these online, but always carefully review the interest rates and fees associated with the loan before deciding.

Strategy # 4 – Consider Alternative Refinancing Options 

If you have bad credit, you can improve your chances of refinancing by applying with another person with good credit, such as a spouse, partner, family member or friend. These are joint applications or guarantor loans and allow combined incomes and assets and reduce the risk for the lender. However, remember that applying with another person means they will also be responsible for repaying the loan if you default. So, ensure you have an explicit agreement and trust each other before signing up. 

Another option that may help you refinance with bad credit is to ask someone who owns their property to act as a guarantor for your loan. A guarantor agrees to use their property as security for your loan if you default on your repayments. This strategy can help you borrow more money at a lower interest rate and avoid paying lenders mortgage insurance (LMI). However, this is a risky option for the guarantor, as they may lose their property if you fail to repay the loan. So, make sure that you understand the implications and obligations before asking someone to be your guarantor.

Strategy # 5 – Seek Professional Advice From A Mortgage Broker

Refinancing with bad credit can be complex and daunting, especially if you are unfamiliar with the different types of loans and lenders available. That’s why it may be beneficial to seek professional advice from a licensed mortgage broker who can help you find the best refinancing option. 

A mortgage broker can assess your financial situation and goals, compare hundreds of loans from different lenders, negotiate on your behalf and guide you through the application process. A mortgage broker can also help you prepare the necessary documents and evidence to support your loan application, such as proof of income, bank statements, tax returns and property valuation reports.

Tiger Finance is one such company. It is an experienced bad credit firm partnered with over 30 of the top lenders in the country to offer the most comprehensive array of loan options to fit any refinancing requirement. As a specialised mortgage broker, Tiger Finance strives to make it simple and easy for every Australian to get the funding they need to achieve their big life goals. 

Overcoming Bad Credit Limitations

Refinancing your home loan with bad credit can be challenging but not impossible. Following these tips and options, you can find a refinancing solution that suits your needs and goals. However, before you apply for a new loan, make sure that you compare the costs and benefits of refinancing and that you can afford the new repayments. Refinancing with bad credit may help you save money on interest, access equity, or consolidate debt.

At Tiger Finance, we always guide you every step of the way with loan experts well-versed in the current situation in the world of financing. You can get a free consultation with our in-house financing expert without obligation to give you the most accurate picture of your loan situation today.

Contact Tiger Finance today so that we can help you begin your journey to secure the exact hassle-free loan product that you need.

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