Refinancing a Mortgage With Bad Credit
Missed payments or a default don't lock you in with your current lender for life. They do change which lenders will look at you and what it costs. Here's the honest picture.
What lenders mean by bad credit
It covers a wide range, and lenders treat each part differently.
| Issue | How lenders tend to see it |
|---|---|
| A low score with no defaults | Often fixable. Sometimes the cause is too many credit enquiries or a thin credit history. |
| Late payments on bills or cards | Banks want an explanation and several clean months since. |
| A paid default | Many lenders will consider it, especially if it's small, old and explained. |
| An unpaid default or court judgment | Banks usually decline. Some non-bank lenders will still lend. |
| Arrears on the mortgage itself | The hardest one. A new lender wants to see the loan back in order first. |
Get your own credit report before anyone else pulls it. It's free from each of the three credit reporters, and errors are more common than you'd think. Our guide to improving your credit score explains how.
If the banks say no
Non-bank and specialist lenders exist for exactly this. They price for risk, so the rate is higher, sometimes much higher, and there can be establishment fees. In return they'll look at the story behind the credit file: a business that failed, a separation, an illness.
We'd only suggest that route when it solves something. Clearing expensive debts, stopping a mortgagee sale, or giving you two years to rebuild are good reasons. Shaving a little off a rate isn't, once the fees are counted.
Plan the way back before you go
A specialist loan should come with an exit plan. Typically that's 12 to 24 months of every payment made on time, defaults paid, and no new problems. Then you refinance to a bank at ordinary rates. Check before signing whether the specialist lender charges early repayment fees, because you're intending to leave.
What makes an application stronger
- A short written explanation of what happened and why it's behind you.
- Proof that defaults have been paid.
- Three to six months of clean bank statements: no dishonours, no unarranged overdrafts.
- More equity. The lower your loan against the home's value, the more lenders will consider you.
This article explains how New Zealand lenders generally assess these situations. It is general information, not personalised financial advice, and lender policy changes often — check your own position with a registered adviser. Official sources: Reserve Bank of New Zealand for lending policy and the OCR, and Sorted.org.nz for independent government-backed money guidance.
Refinancing with bad credit: common questions
Credit history holding you back?
Tell us what's on your file and what you owe. We'll tell you confidentially which lenders are realistic, what it would cost, and whether it's worth doing.
- ✓ Your bank's offer compared with the 23 lenders on our panel
- ✓ Break fees, legal costs and any cashback clawback worked out first
- ✓ We only recommend switching when the numbers work
- ✓ No fee on residential home loans: the lender pays us
Finch Mortgages Limited (FSP1011125) is an Authorised Body under Finsure New Zealand Limited's financial advice provider licence (FSP1005389). Disclosure statement