How to refinance a mortgage with bad credit in Sydney

Mortgage refinancing, especially when you're dealing with bad credit can be very daunting. The term 'bad credit' alone might make you cringe, but don't worry, it's not the end of the world. In fact, it's a situation many people find themselves in at some point. What's important is understanding how to navigate it and that's exactly what we're going to discuss here.

Maintaining a good credit score is crucial, no doubt about it. It's like your financial report card, and trust me, lenders are definitely checking your grades. But life happens, right? Late repayments, income dips - these things can impact your credit score. But even with these hiccups, refinancing your mortgage is still possible.

Understanding Bad Credit

So, what exactly is bad credit? In simple terms, it's a low credit score that suggests you might be a risk to lenders. This score is calculated based on your credit history, which includes factors like how often you've made late payments, how much debt you have, and whether you've ever defaulted on a loan.

Late repayments and income dips can significantly impact your credit score. For instance, if you've been late on your credit card payments or if you've had a significant drop in income, your credit score might take a hit. This can make refinancing your mortgage a bit tricky, but it's not impossible.

Strategies for Refinancing with Bad Credit

Let's talk about how you can refinance your mortgage even with bad credit. The first step is to have a chat with your current lender. They already know your financial situation and might be willing to work with you.

If that doesn't work out, don't worry. There are specialist lenders out there who specifically work with people with bad credit. They understand that everyone's situation is unique and are more flexible with their lending criteria.

Another strategy is to consider consolidating your debts into your mortgage. This can make your repayments more manageable and potentially improve your credit score over time.

You could also consider applying with a co-borrower. This could be a partner, a family member, or a friend who has a better credit score. Their good credit could help offset your bad credit and increase your chances of approval.

Lastly, you could consider refinancing with a private lender. They're typically more flexible than traditional lenders, but keep in mind that their interest rates might be higher.

Pros and Cons of Refinancing a Mortgage

Refinancing a mortgage can have several advantages. It can lower your interest rate, reduce your monthly payment, shorten your payoff term, eliminate lender's mortgage insurance (LMI), and even allow you to cash out some of your home equity.

But like everything else in life, it's not all sunshine and rainbows. Refinancing can also have some disadvantages. For instance, you might end up paying more in the long run due to additional fees, a longer loan term, or a higher interest rate.

Understanding Joint Mortgages

A joint mortgage is when multiple people share a loan. This can be a great option for first homebuyers or for those who want to pool their finances.

Qualifying for a joint mortgage involves evaluations of everyone's credit scores, income, debt, and employment history.It's not just about your individual financial situation, but also about the financial situation of the other person or people on the mortgage.

There are several benefits to a joint mortgage. For one, you might have more housing options due to the pooled income. You might also qualify for potential tax benefits and a larger loan.

The Sydney Mortgage Refinancing Market

Sydney's mortgage refinancing market is unique, with its high property prices and competitive lending environment. The city's median house price is well over $1 million, making it one of the most expensive real estate markets globally. This high cost of living means that many Sydney homeowners are particularly interested in refinancing to reduce their monthly payments or tap into their home equity.

Reputable refinancing lenders in Sydney include the big four banks - Commonwealth Bank, Westpac, ANZ, and NAB - as well as smaller lenders like ING, UBank, and Athena Home Loans. Each of these lenders offers a range of refinancing options, so it's worth shopping around to find the best deal for your circumstances. You can also speak to a broker who will help you find the best rates and the best lender for your circumstances.


Understanding and mastering bad credit mortgage refinancing in Sydney can be a complex process, but it's definitely achievable. By doing your research, comparing different loan options, and carefully considering the costs and benefits, you can make a decision that improves your financial situation.

However, it's important to remember that refinancing isn't always the best option. If the costs outweigh the benefits, or if you're not confident that you can keep up with the new loan payments, it might be better to stick with your current loan. Always consider your own financial situation and seek professional advice if you're unsure.

About the author 

Harold Simmons

Harold is the founder and creator of the Asset Owners Discussion Project. He creates quality resources so investors can get access to information they wouldn't normally be able to access. He has been investing in real estate for almost three decades and is particularly experienced with mortgages and refinancing.

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