Often people have poor credit for reasons that are no longer relevant and while the issues may show up on a credit check, they do not automatically exclude you from getting a mortgage.
While banks may decline a finance application, mortgage brokers have the expertise to present mortgage applications to the banks and other non-bank lenders so will often not have too much problem getting loans approved regardless of the past issues described as bad or impaired credit.
Let A Mortgage Broker Deal With Your Existing Bank
Unfortunately many people will approach their own bank hoping to get a mortgage approved, only to have the application declined due to bad credit.
They think and are often told by the bank staff not to use a mortgage broker for various reasons, but the real reason is often that they are on a bonus scheme – it really has nothing to do with you.
It is important to contact a mortgage broker before you speak to your bank so that the application can be presented in the best possible light. While of course you need to disclose everything, there are certain things that banks like to know and ways to present information that gives a better chance of a “yes” rather than a decline.
Another advantage of using a mortgage broker is choice.
Choice offers you more options, but it also ensures that the banks make every effort to approve an application as they know that another bank or non-bank lender will be wanting to get your business.
Most mortgage applications that are declined by the banks due to a credit impairment would be approved by a bank or a non-bank lender whom is able to offer interest rates similar to a bank.
What Can Non-Bank Lenders Offer
There are a lot of non-bank lenders who are able to approve mortgages that the banks decline.
Some of these lenders offer long-term mortgages at very competitive interest rates, while others are designed as short-term lenders to ‘fix’ a problem with the view that the mortgage would be refinanced when the credit issue has been addressed.
Non-bank lenders and finance companies have options that might help you.
Bad Credit Is A Common Reason To Use Non-Bank Lenders
Life is not always a smooth ride with health issues, relationship problems, employment and business issues and the taxman all waiting to throw a curve-ball for you to deal with. It is therefore not uncommon for people to have credit issues that could be deemed as “bad credit” or a minor hic-up.
With credit agencies like Veda Advantage (formerly Baycorp) this information is available to lenders and stays on your credit record for 5-years even after paid.
While banks can treat you like a lower class citizen, some banks and the non-bank lenders have a better understanding of these issues and have mortgages designed to help you obtain finance and therefore stay on the property ladder. Some lenders have specific products designed to restore you to prime lending as you prove your credit worthiness with them and your credit history.
Yes, and sometimes no.
Often small credit issues can be explained and therefore the banks can be convinced to offer standard mortgages, but if your credit report shows a few defaults and collections then the mortgage could be at a higher interest rate and depending on the lender there are often fees applied to a loan.
If there are unpaid collections, current or recent mortgage arrears or overdue council rates then they will need to be addressed.
The banks will often say “NO” when an application is too hard for them and this is where a good mortgage broker can make a huge difference. When a broker works on a finance application they will do everything they can to make it work as this is how they generally get paid – on success. They will go through an application and present it so the lenders can easily understand the issues and therefore be in a position to make a lending decision, which of course we would all hope to be an approval.
A mortgage broker will weigh up the options for you and sometimes may use a combination of a 1st and 2nd mortgage to get the best result for you. Not all brokers have expertise or experience in this type of lending and therefore you should always look for mortgage brokers like those at Mortgage Link who have access to a wide range of lenders and are able to assist.
You may just need a fresh start.
Protect Yourself Too
What was the cause of the bad credit?
Often when you look at things with hindsight you realise that there were some things that you could have done differently that could have changed the outcome significantly.Of course it is too late now to change what has happened, but we can plan to ensure that the same issues will not cause the same problems in the future.
Focus On The Big Picture
In life you sometimes need to take a long-term approach; whereas we all hope that issues such as bad credit are short-term.
Property can provide long-term gains and you would not want to delay a purchase in cities like Auckland too long as prices have been known to rise at a pace that means you can struggle to get back into the market.
Seek mortgage advice and make a considered decision which should include how long the bad credit will continue to impact you.