Can I get a Mortgage with Bad Credit?

Can I get a Mortgage with Bad Credit?

Well, what is bad credit?

If you have a history of not paying your bills on time, you could have bad credit. In New Zealand, if you struggle to pay your rent and other bills, such as your credit card, phone plan or other utilities, this information will be recorded in your credit history. Future lenders who see your loan application will assess your credit history to determine whether you are a risk to them for approving a loan to you. Lenders may hesitate to approve your loan if your credit history is too inconsistent. It’s also not considered a bad credit. Your credit would be considered lower-than-average. Lenders want to ensure that you will pay their loan back consistently before they approve your loan.

How Much Deposit Do I Need?

So, is it possible to get a loan with a bad credit score?

Yes. But it might be a little more challenging! How is it possible?

Find a Mortgage Broker

Find a mortgage broker who you feel comfortable working with. A mortgage broker can help navigate you through the jargon of the world of credit history, and guide you through the process of bettering your credit. They understand New Zealand banks, lenders and their requirements. They can help you develop the most effective strategy for improving your credit and finding solutions that will get you on the path to homeownership!

We can help you find a reputable mortgage broker!

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Improve your Credit

Firstly, most mortgage lenders will probably want to know why your score wasn’t high to begin with. You may need to spend some time, up to a year, improving your credit. Work hard to pay your rent and other bills on time consistently for a year and you will make a wonderful difference to your credit score. This will show lenders that your situation has changed, and that you took steps to make that change. Lenders like to see healthy habits and effort to reduce financial risk.

Save a Larger Deposit

If you are able to improve your credit, lenders may be able to help. But they will want to reduce their risk of loaning to you and may require a larger deposit. Typically, deposits are 20% for first home buyers. So, get saving! You can compare your bills with NZ Compare to find better deals on your utilities bills and use those savings towards your deposit. Cut down on takeaways and spending. Increase your Kiwisaver contribution. You can do this! 

Prepare for Higher Interest Rates

Lenders may also require you to pay higher interest rates if you have a lower credit history. Similarly to a higher deposit, lenders may require you to pay a higher interest rate due to the risk you may pose to them. A higher interest rate is another way for them to secure their position as lenders to you if you pose a threat. However, it’s not all bad! You could have this reassessed in a year if your mortgage repayments and other bills have all been paid on time. Your lenders may agree to refinance your mortgage, which could be a great opportunity to secure a lower interest rate, and pay off your mortgage faster. And you’ll save hundreds of dollars! 

Tip: Use NZ Compare to Lower Your Bills

Comparing your power, broadband and mobile bills is a great way to save money in the long run. NZ Compare’s websites allow you to see all the plans available to you, such as for broadband, power, mobile, and compare them side-by-side. You may find yourself a deal that offers more for a better deal, thus saving you hundreds of dollars over the course of a year. With a lower power bill, for example, you may find it easier to pay your bills on a regular basis and therefore, improve your credit score faster!

To do so, follow these simple steps: 

  • Go to NZ Compare and choose a website for broadband, power, mobile, or money.
  • Type in your address
  • Hit enter.
  • Browse all the different plans available to you & compare them side-by-side.
  • Find one you like and switch!

Or, if you’d prefer to speak to a friendly person, then give our customer service team a free call on 0508 22 66 72. They offer bias-free and hassle-free advice on power providers available to you.

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Friday, 9 February 2024