Bad Credit Mortgages

A guide to bad credit mortgage loans

Introduction to Bad Credit Home Loans

Many customers with bad credit are turned down for home loans or told they’ll have to settle for higher interest rates, but this doesn’t have to be the case. We work with expert brokers who arrange bad credit mortgages every day, and they know exactly how to boost your chances of approval and land you a favourable deal.

The advisors we work with have access to specialist lenders who provide bad credit housing loans, and this guide will give you all of the information you need before you start your application.

The following topics are covered below…

What are bad credit mortgage loans?

A bad credit mortgage is a type of home loan for customers with credit issues that would prevent them from qualifying for a traditional mortgage or mean they could only get one with higher interest rates.

Lenders who offer home loans for people with bad credit history have the flexibility to take the age, severity and reason for the adverse credit into account and base their lending decision on these factors.

Applying through a bad credit broker, like the ones we work with, is the best way to find these specialist lenders and ensure you end up with the best deal.

How do bad credit mortgages work?

They work in exactly the same way as regular home loans, except the lending criteria can be more flexible. The specialist lenders who offer poor credit mortgages assess customers on a case-by-case basis and look at the following…

  • The age of the credit issue: The longer it’s been on your file, the better
  • The severity of the issue: For example, telco and utility-related defaults are less severe and easier for lenders to overlook than financial default listings
  • The reason for the issue: An unexpected life event is easier for lenders to overlook that serious financial mismanagement

Adverse credit mortgages carry more risk for the lender, so many of the providers offering them will expect you to put down extra deposit to offset this.

Make an enquiry to find out more about getting a mortgage with bad credit. We can introduce you to an expert broker for a free, no-obligation chat.

Bad credit mortgage requirements

The exact criteria you will need to meet when buying a house with bad credit will vary depending on the type of credit problem you have. The mortgage lenders who offer these home loans assess applications on a case-by-case basis, but most will ask for at least 20% deposit to help offset the risk posed by your credit problems.

You’re also more likely to be approved if…

  • You’ve made your debt repayments on time for the last six months
  • You find a specialist lender rather than a mainstream bank
  • You’ve been discharged (essential if it’s a bankruptcy or Part IX agreement)
  • You apply through a mortgage broker

Although most bad credit mortgage lenders ask for at least 20% deposit, through one of the brokers we work with, it may still be possible to find favourable deals for customers with 10% or even 5% deposit, depending on the severity of the credit issue. Make an enquiry and we’ll introduce you to an expert who can help.

Types of bad credit mortgages

There are home loans for customers with all kinds of bad credit, including…

  • Defaults
  • Discharged bankruptcies
  • Part IX debt agreements
  • Tax debt
  • Multiple smalls debts that have become unmanageable

Read on for more information about these types of bad credit home loan or make an enquiry to speak to an expert broker about your circumstances.

Credit defaults

There are two types of default that mortgage lenders look for when assessing your credit report: paid defaults and unpaid defaults (ones you haven’t settled yet).

It is possible to get a mortgage with unpaid and paid defaults, although the exact deals you will qualify for may depend on the size of the debt. Your choice of lenders will likely be greater if your debts have been settled in full.

Through the right specialist lender, it may be possible to borrow up to 95% of the property’s value with a small paid default on your file. This drops to 90% for customers with large defaults or more than one default. The same loan to value (LVR) ratio is also possible with unpaid defaults, but keep in mind that most lenders will want the debt to be repaid before approving your application.


Bankruptcies are considered one of the most severe types of bad credit, so mortgage lenders will insist that the bankruptcy is discharged before they will approve an application. The longer it has been discharged for, the better, but there are specialist lenders out there who offer mortgages the day after a discharge.

Part IX debt agreements

Part IX debt agreements remain on your file for up to seven years and are considered one of the more severe forms of bad credit.

Some bad credit mortgage lenders will only consider your application if you’ve finished paying off your debt, but others might be willing to approve you if the debt has been paid on time consistently. With the right mortgage provider, it is possible to borrow between 80% and 90% of the property’s value under these circumstances.

Tax debt mortgages

This is a type of bad credit remortgage product specifically for customers who are in debt with the Australian Taxation Office (ATO). Lenders will want to know the cause of your tax debt and will usually insist that the debt and the amount you’re borrowing is no more than 85% of the value of your property when combined.

Provided that you own real estate to secure the loan against, a tax debt mortgage could consolidate your outgoings by rolling the ATO debt onto your home loan.

Debt consolidation mortgages

These refinance products are aimed at customers with multiple small debts that have become unmanageable. They work similarly to tax debt mortgages, allowing real estate owners to consolidate their debts onto their mortgage.

Most lenders who offer these home loans will cap the deal at 80-90% LVR and prefer customers with no missed home loan payments in the last six months.

How to qualify for a home loan with bad credit

First of all, don’t contact a mainstream bank as most of them reject bad credit customers outright. You’ll need a specialist lender who’s happy to take the age, severity and reason for your credit issues into account. The best way to find the one for you is to apply through an expert broker, like the ones we work with.

A mortgage broker can search the market for the home loan provider who is best positioned to offer favourable rates to a customer with your exact profile, but there are steps you can take before this to boost your chances of success.

  1. Review your own credit history: You can do this by contacting Equifax, Australia’s largest credit bureau. Familiarising yourself with your own credit report will help you save time and allow you to challenge any errors.
  2. Pay off any debts you’re in a position to clear: Your choice of approachable lenders and attainable deals will be higher if you’re not actually in debt. Consolidating some of your debts might also be an option.
  3. Save up as much deposit as possible: The more deposit you can put down, the less risk your credit problems will pose to the mortgage lender.

Getting a mortgage with a bad credit rating

Having a poor credit rating or credit score is not strictly the same thing as having bad credit per se. Equifax assigns you a credit score out of 1,200 and if yours falls below 509, you will be classed as higher risk and might struggle to get a home loan.

If your score is between 510 and 621, this would be classed as average and lenders may ask for a larger deposit or offer you higher interest rates.

The most important thing to keep in mind here is that not all mortgage providers base their lending decision on credit scores. They assess bad credit customers on a case-by-case basis and are more concerned about the overall strength of applications, rather than numbers an agency has assigned.

So, it’s absolutely possible to get a mortgage even if your credit score is low. Make an enquiry and we’ll introduce you to a broker who can find the right lender for your circumstances.


Applying for house finance with bad credit?

Read through our FAQ section below for additional information on this topic.

What’s the easiest way to get a home loan with bad credit?

Applying through a broker who has expert market knowledge. Going it alone and approaching lenders directly could further jeopardise your chances of getting a home loan by adding more unwanted marks to your credit report.

The brokers we work with can pair you up with the specialist lender that’s best positioned to offer you a mortgage, at the first time of asking.

Can you get a joint bad credit mortgage?

Yes. There are specialist bad credit mortgage lenders who accept joint applications but this may not be your only option. Other alternatives include applying as a solo applicant or making a ‘one borrower two owners’ application.

Make an enquiry and we’ll introduce you to a broker who can lay out all the options and suggest your best course of action.

Can I get a second mortgage with bad credit?

Second mortgages, in general, can be more difficult to qualify for as your current mortgage debt will be factored into the eligibility assessment. Make an enquiry to find out whether it’s possible to get one with your credit profile.

Are there home loans for pensioners with bad credit?

Yes, as long as the mortgage lender is confident you can keep up with your home loan payments during your retirement. There are lenders who specialise in both bad credit and retirement mortgages but your choice of finance providers will likely be more limited because you fall into two higher risk categories, especially if more than 50% of your income comes from a pension.

Can I get a home equity loan with bad credit?

Yes. As long as the loan to value ratio (LVR) fits in with the lender’s criteria. Bad credit home loan providers assess creditworthiness on a case-by-case basis and take customer circumstances into account, and this works on a sliding scale.

For home equity loans, the LVR and the rates get higher as the risk increases.

Can I get an investment home loan with bad credit?

Yes. Like with residential home loans, whether your application is approved and at what interest rate will likely depend on the age, severity and reason for your bad credit. We work with investment loan experts who can help you find the best deal.

Can I get a self-employed mortgage with bad credit?

Yes, provided you satisfy all of the mortgage lender’s requirements for self-employed mortgage applicants. You can read more about the eligibility criteria in our comprehensive guide to self-employed mortgages.

What should I do if my home loan application has been rejected?

Speak to a mortgage broker. Launching straight into another mortgage application right away might not be in your best interest as too many requests for finance in a short space of time can negatively impact your credit report.

The last thing you need is another rejection, but the expert brokers we work with can make sure you’re paired with the lender who’s most likely to offer you a lifeline.

How do I fix my credit fast to get a mortgage?

There are ways you can improve your credit score, but be sure to seek professional advice before you actually apply for your home loan.

Here are some tips for improving your credit rating…

  • Make credit repayments on time:
    Defaults and late payments can have an adverse affect on your credit rating. Pay all your bills on time and try to pay your credit card balance in full each month.
  • Consolidate debts:
    If you’re struggling to pay off multiple loans, you could consolidate your debts into one payment. We would recommend that you consult an expert to find out if this is the best option for you.
  • Lower your credit limits:
    Your credit score is also affected by how much unused credit you have (e.g. credit cards). Lowering the limit will eliminate any temptation to use it and may have a positive effect on your credit score.

Can you apply for bad credit mortgages online?

You can kickstart your application online by making an enquiry with us. If online is your preferred channel, we can match you with a broker who is happy to use this method of communication for as much of the application process as possible.

How much can I borrow?

Most bad credit mortgage lenders would let you borrow up to 90% of the property’s value if you have larger defaults, judgements, court writs, a Part IX agreement or a discharged bankruptcy, as long as you meet their other eligibility requirements.

Customers with minor paid defaults up to $500 can potentially borrow up to 95%.

Getting a mortgage with bad credit history can be difficult but it doesn’t mean finding a favourable deal is impossible. We work with bad credit mortgage experts who know exactly which home loan providers to approach on behalf of customers with your needs, circumstances and credit history.

Make an enquiry online and we’ll match you with the right broker for you. We won’t charge a fee for introducing you and there’s absolutely no obligation.

Speak to an advisor

Call us on 0808 189 0463 or fill out our quick enquiry form to be matched with the perfect advisor for you.