Table of Contents

1. Can a Mortgage Broker Help with Bad Credit Home Loans? Yes!
2. Understanding Credit and Its Impact
3. When The Bank Said No – Talk to Our Mortgage Advisers
4. Improving Your Chances of Getting a Home Loan
5. Save a Larger Deposit
6. Bad Credit Home Loan Options
7. First Home Buyers
8. Self-Employed
9. Recovering from Bankruptcy or Other Financial Hiccups
10. Considering Guarantor or Co-Signer Options
11. Strategies for Managing a Mortgage with Bad Credit
12. Debt Consolidation and Loan Structuring
13. Building Equity for the Future
14. Your Home, Your Future

Can a Mortgage Broker Help with Bad Credit Home Loans? Yes! 

As a seasoned mortgage broker in New Zealand, I’ve seen firsthand how challenging it can be for Kiwis with less-than-perfect credit to secure a home loan. But here’s the good news: it’s not impossible!

Whether you’re a first-time buyer with no credit history, self-employed with fluctuating income, or someone who’s faced financial hurdles due to illness or other circumstances, there’s hope. Let’s explore how to turn your homeownership dreams into reality, even with bad credit.

At OneStop Financial Solutions, we work with many non bank lenders who offer people with bad credit a chance to buy a home. We love to get creative with financing options, so if the bank said no, talk to us.

Your journey to homeownership might have some bumps along the way, but with our expert mortgage brokers by your side, you’re not traveling alone. We’re here to navigate, support, and celebrate with you as you take steps toward owning your home. Remember, you deserve a place to call your own, and with the right guidance, that dream can become a reality.

Understanding Credit and Its Impact

First things first, let’s demystify credit. Your credit score is like a report card for your finances, summarising your borrowing history and how well you’ve managed debt. In New Zealand, this score can significantly influence your ability to secure a mortgage. But remember, a low score isn’t a life sentence – it’s a snapshot that can be improved.

In New Zealand, scores typically range from 0 to 1000, with scores below 500 generally considered bad credit. These indicate a higher risk to lenders and may result in loan rejections or higher interest rates.

Credit reporting agencies like Equifax and Centrix collect and maintain credit data, including your borrowing and repayment activities. They analyse this data to generate your credit report, which lenders review during the loan application process.

Key factors influencing your score include the length of your credit history, your debt levels, and your payment history. A poor repayment history or a high debt to income ratio can lower your score, making it harder to secure a mortgage deal.

Sometimes, lenders might require a larger deposit or additional documentation to offset the risk.

An adverse credit score might also limit your choice of lenders, pushing you towards non bank mortgage options and second tier lenders who cater to higher-risk borrowers.

This is where mortgage advisers like myself come in. We’re not just middlemen; we’re your advocates in the complex world of home finance. With our extensive network of banks and lenders, we often find solutions that might not be immediately apparent to you.

When The Bank Said No – Talk to Our Mortgage Advisers

A mortgage broker serves as a professional intermediary between you and potential lenders.

We assess your financial situation and help you find the best home loan. By evaluating your income, credit score, and other factors, we can suggest suitable loan options. There are many non-bank mortgage lenders in NZ, and it’s our job to offer mortgage advice and find the home loan you need. 

We handle much of the paperwork and streamline the loan application process.

Our role includes ensuring compliance with regulatory requirements and explaining the terms of each loan product. This simplifies your task and can increase your chances of securing a favourable mortgage, even with a poor credit history.

Low or no-doc options are available for self-employed people who struggle to show proof of income, and flexible lending criteria are available for others with credit issues. Even if traditional banks have turned you down, you can still buy a house with bad credit. 

Improving Your Chances of Getting a Home Loan

While we work on finding the right loan, there are steps you can take to boost your eligibility:

1. Focus on improving your credit records by consistently paying bills on time.
   2. Save for a larger deposit. Remember, your KiwiSaver can be a powerful tool here.
   3. Consider debt consolidation to simplify your finances and potentially improve your credit rating.

We’ve discussed what affects your credit rating above. Make sure to check your credit report for errors or inconsistencies and have them corrected.

Pay your bills on time consistently, including rent, phone, and electricity. This can have a positive impact over time. 

If you have any outstanding defaults or overdue payments, work on settling them as soon as possible. Reducing the amount of your overall debt can also positively impact your score.

Save a Larger Deposit

Having a larger deposit can increase your chances of securing a mortgage. Aiming for at least a 20% deposit can make you a more attractive borrower to lenders, even with a bad credit history. 

Saving for a larger deposit shows lenders that you have financial discipline and a commitment to purchasing the property. While saving, ensure you keep track of consistent income and prudent financial management.

This might mean cutting back on non-essential expenses and setting a strict budget. Lenders often favour applicants who can demonstrate solid financial habits.

It’s not the be all and end all though. Our article on low deposit home loans offers further advice here.

Bad Credit Home Loan Options

Life happens, and we understand that. Whether you’ve faced unemployment, critical illness, or other financial setbacks, there are ways to present your case in the best light to lenders. It’s about showing how you’ve overcome challenges and demonstrating your current financial stability, regardless of a low credit score.

Don’t let interest rates and mortgage calculations intimidate you. We’ll work together to understand the costs involved, using mortgage calculators to give you a clear picture of what you can afford. And if refinancing is an option down the line, we’ll explore how that could benefit you.

Here’s some ways we’ve helped secure a home loan with bad credit:

First Home Buyers

As a first-home buyer in New Zealand, you might find yourself with a poor credit rating. This could be due to lack of credit history or perhaps a few missed payments on your mobile phone bill during your university years.

Remember, your credit score isn’t set in stone – with some focused effort on timely bill payments and responsible credit use, you can steadily improve your rating and move closer to your dream of homeownership.

• Start by checking your credit score and discussing your situation with our expert mortgage brokers.
• Consider leveraging KiwiSaver for your deposit.
• A higher deposit can improve your loan prospects, even with past credit issues. Be prepared to pay slightly higher interest rates initially. However, diligent repayment can boost your credit score over time, potentially qualifying you for refinancing at lower rates.

Self-Employed 

For self-employed Kiwis, maintaining a stellar credit rating can be challenging due to fluctuating income streams and the complexities of managing business and personal finances simultaneously. However, don’t let this discourage you from pursuing your homeownership goals.

There are mortgage products specifically designed for self-employed individuals, such as low-doc loans, which require less documentation than traditional mortgages. These loans often allow you to use alternative proof of income, like bank statements or accountant-certified financial statements, making it easier to demonstrate your ability to repay even without a consistent paycheck.

Recovering from Bankruptcy or Other Financial Hiccups

Recovering from bankruptcy or significant financial hiccups can be a long road. We can help you find lenders willing to work with your unique situation. Non-bank lenders offer more flexible lending criteria compared to traditional banks, and lend to discharged bankrupts.

Focus on rebuilding your credit by consistently paying outstanding debts. To improve your chances, you’ll likely need a convincing recovery plan and a sizeable deposit.

Regularly updating your broker on your financial improvements ensures they can adjust your strategy for better loan terms. We understand that life happens and are more willing to work with you to find a suitable loan.

Keep in mind these loans might come with higher interest rates. They provide a pathway to homeownership that might not be available through conventional means.

Considering Guarantor or Co-Signer Options

If you have a bad credit score, another way to improve your chances is to get a guarantor or co-signer. This involves someone else, usually a family member, agreeing to cover the mortgage payments if you cannot.

A guarantor with a good credit history can make you a more appealing candidate to lenders. When considering a guarantor, ensure that both parties understand the responsibilities and risks involved.

Clear communication and formal agreements about the repayments and any implications for the guarantor’s credit score or financial obligations in the future are essential.

Strategies for Managing a Mortgage with Bad Credit

Managing a mortgage with bad credit involves exploring refinancing options, debt consolidation, loan structuring, and building equity over time. Each of these strategies can help improve your long-term financial position and ease your journey up the property ladder.

Refinancing your mortgage might seem challenging with bad credit, but it’s worth considering. Non-bank mortgage lenders often offer refinancing options specifically for those with poor credit.

These loans usually come with higher interest rates to offset the lending risk. However, securing a lower rate than your original mortgage can result in significant long-term savings.

Debt Consolidation and Loan Structuring

Debt consolidation is another useful strategy. This involves combining multiple debts into a single loan, ideally with a lower interest rate. Doing so simplifies your repayments and potentially lowers your overall monthly payments.

Our mortgage brokers can help you structure your loan to accommodate your financial situation. We can negotiate with mortgage lenders to find a consolidation loan that suits your needs.

Additionally, with proper structuring, you can look at options that extend the term of your mortgage, thereby reducing monthly payments. Debt consolidation can also improve your credit score over time as it shows you are managing your debts responsibly. This can make refinancing easier down the track.

Building Equity for the Future

Building equity is a long-term strategy to strengthen your financial standing.

Equity is the difference between the current market value of your property and the outstanding mortgage balance.

You can build equity by making extra mortgage payments. This will reduce the principal faster. Even tiny additional payments can make a difference over time.

Another way is to invest in home improvements that enhance the property’s value.

A higher equity position gives you more leverage with mortgage lenders. It can lead to better refinancing terms and more favourable loan options in the future.

Your Home, Your Future

Here’s the bottom line: bad credit doesn’t have to be a roadblock to homeownership in New Zealand. With the right guidance, a bit of preparation, and a dash of perseverance, you can find a path forward. As mortgage brokers, we’re here to help you navigate this journey, turning what might seem like financial obstacles into stepping stones towards your new home.

Remember, every successful homeowner started somewhere, and many faced challenges along the way. Your story of homeownership is waiting to be written, and we’re here to help you pen that first chapter. So why wait? Let’s start exploring your options today and take that first step towards making your homeownership dreams a reality. With the right support and strategy, you’ll hold those house keys sooner than you think!