The refinance ladder
Credit-impaired borrowers often climb back to mainstream lending in steps. Each rung needs a stretch of clean conduct and usually brings a lower cost:
| Where you are | What usually unlocks the next step |
|---|---|
| Short-term private loan or caveat | A specialist home loan that can take it out, once the immediate crisis is sorted |
| Specialist (near-prime) home loan | 12 to 24 months of on-time repayments and older, settled credit events |
| Mainstream non-bank or bank loan | Credit events aged off or well behind you, and full documents |
Refinancing out of a private loan or second mortgage
Short-term private loans are useful in an emergency, but they're expensive and they end. If yours is coming due, start looking for the refinance early. Specialist lenders can pay out private first mortgages, caveats and second mortgages, provided the numbers and your income support a longer-term loan.
Releasing equity with bad credit
Some specialist lenders will release equity for a genuine purpose, such as renovations, paying out debts or a business need, even with credit marks. Expect a lower maximum loan-to-value ratio and to explain the purpose clearly. Cash for no stated reason is much harder to place.
What lenders look for when you refinance
- Your current loan's repayment history. Twelve months on time is powerful evidence.
- Equity. It sets how much you can borrow and how many lenders are in play.
- Credit events since. New defaults or missed payments reset the clock.
- Exit costs on your current loan. Discharge fees and break costs are part of the maths, and we include them.
Costs to weigh up before refinancing
| Cost | Who charges it |
|---|---|
| Discharge fee | Your current lender |
| Break costs (fixed rate loans) | Your current lender |
| Application and settlement fees | Your new lender |
| Government registration fees | State land titles office |
| Risk fee or mortgage insurance | Your new lender, on some specialist loans |
A refinance only makes sense if the savings or the problem solved outweigh these costs. We set them out side by side before you commit.
A worked example
A sole trader took a 12-month private first mortgage during a cash crunch. With eight months gone, the business has recovered and he's lodged his BAS on time throughout. A specialist home loan lender refinances the private loan using alt doc income, at a far lower cost and with a 30-year term, before the private loan's maturity date.
Timing your refinance
- Private or short-term loan: start at least three months before it matures.
- Specialist loan: check in after 12 months of on-time repayments.
- Fixed rate ending: look at options two to three months before expiry.
- After a credit event drops off your file: a good moment to re-test the market.
Want us to check your position? It won't affect your credit score.
What you’ll need
- Photo ID
- 12 months of current loan statements
- Credit reports
- Income evidence
- Bank statements
- Payout figure from your current lender
Who it usually suits
- Homeowner with an existing loan
- Good equity
- Recent clean repayment history
- Income that supports the loan
- Credit issues explained
