Want a more efficient and effective way to compare home loans? Just follow these steps:

1) Identify the non-negotiable features you need.

Google those features and shortlist the banks that offer them. Forget about the others, as there’s no reason to spend time of offers that don’t suit your needs.

Learn here about all the features you might need.

2) Narrow your list even further by looking at the comparison rates.

The comparison rate is a government-mandated rate that lets you quickly compare home loans side-by-side since it incorporates the impact of fees into the interest rate. We’ll look at fees and interest rates later but for now, the comparison rate makes it easy to weed out unfavorable loans.

3) Research each loan’s interest rate, fees and other features.

List your new loan options from step two in a column and put three headings across the top:

• Actual interest rate. This is how much your debt will grow each year. The lower the better.

• Fees. There are dozens of possible fees (think “application fee” and others). Look for options with lower and cheaper fees. Learn all about home loan fees here.

• Comparison rate. The effective interest rate after fees are factored in.

• Features. All options on your list will contain your non-negotiable features. This list is for other features you may find useful.

You’ll now have a table where you can fill out the relevant details. So get filling!

4) Talk to the banks.

It’s a highly competitive market, so call all the banks on your list and try to negotiate a better rate, citing lower rates you’ve found elsewhere.

See if they’ll drop fees that other banks don’t charge or that don’t seem relevant.

If they agree, ask them to quote you a new comparison rate – then plug that into your table.

If you’re not the assertive type or you find this too time consuming, you can always talk to a home loan broker to help negotiate with banks on your behalf.

5) Sort by comparison rate.

Look at the banks that have the best rate and then consider if you feel comfortable taking out a loan with them.

This is where you can take soft traits into account:

• Do you feel more comfortable with one of the big 4 or are you OK with a smaller bank?

• Did you establish rapport with the loan officer?

• Do you find any of the other features from your table useful?

• Do you like the look and feel of the lender’s app and other online tools?

That’s all there is to it

Comparing home loans doesn’t have to be complicated, but you do have to be thorough. As long as you do the research and stay organised, you should be able to home in on the right loan for your needs.

Once you do, the next step is to fill out your application.

The information in this blog post is general in nature and does not constitute personal financial or professional advice. It is not intended to address the circumstances of any particular individual. We do not guarantee the accuracy and completeness of the information and you should not rely on it. Before making any decisions, it is important for you to consider your personal situation, make independent enquiries and seek appropriate tax, legal and other professional advice.

The post How to compare home loans appeared first on Credit Simple NZ.

Here is a list of the most common home loan features lenders offer with their home loans.

We explain some of these features in more depth on their own page if you want to learn more about them.

You might not need all of these features, so don’t overlook a loan with an attractive interest rate and fee structure for flashy features you might not even need.

With that out the way…

Here’s your list of home loan features

Offset account

An offset account is a transaction account linked to your home loan. The money in this account could offset the money you owe, meaning you’re only charged interest on the difference. Plus you can easily withdraw your money from this account if you ever need it.

Loans with offset accounts can sometimes come with higher interest rates. Sure you can save a lot in interest, but if you don’t plan on carrying a large balance in the account or you’d be tempted to spend the easily accessible funds, it may not be worth it.

Extra repayments

This is when the lender lets you pay extra on top of your normal agreed-upon repayments. It can help you pay less in interest and/or pay your loan off early.

But be aware that if you pay off a fixed-rate loan early, you may incur a fee called a break fee or break cost (break costs don’t typically apply to variable-rate home loans).

Redraw facility

A redraw facility goes hand-in-hand with extra repayments. It basically lets you access the funds from your extra repayments if you need them down the road. If you haven’t made any extra repayments, you can’t get any money out.

There is sometimes a fee for withdrawing these excess funds, so you should only use this feature for emergency situations.

Repayment holiday

A repayment holiday lets you take a short break from making your regular payments if you’ve previously built up enough of a buffer through extra repayments. It will apply those extra funds toward your monthly repayments and it comes in handy during transitional times like starting a new job, having a baby, losing a job or retiring.

Fixed-rate loan

This is a loan where the interest rate doesn’t fluctuate with the Reserve Bank’s official cash rate. Lenders usually only offer fixed-rate loans for periods of 1-5 years, after which your loan will revert to the variable rate.

Fixed-rate loans often have higher-rates to start off with, and it’s usually more expensive to pay them off early. However, they do offer consistency.

Split-rate loan

A split-rate home loan is a feature that lets you split your loan into two loan products: a fixed-rate loan and a variable rate loan. This lets you enjoy the flexibility and additional features of a variable-rate loan while also benefiting from the stability and consistency of a fixed-rate loan.

Remember that your fixed-rate portion will usually revert to a variable rate at the end of your fixed-rate period, which will vary based on the lender.

Interest-only loan

If you need to reduce your monthly payments, some lenders will offer an interest-only payment for a short time (usually up to 7 years). That means your payments won’t be large enough to cover any of the principal, which is the actual amount you borrowed.

This is great for first-time buyers whose funds are tight and investors who want to minimise taxes. However, it means that you’ll pay more in the long-run so it’s not good to make a habit of it.

Low-deposit loan

Most lenders will pony up 80% of the home’s value, meaning you have to come up with the other 20% first. But some will offer low-deposit options and may give you up to 95% of the home’s value.

If you’re able to score a low-deposit home loan, you’ll usually be required to purchase Lenders Mortgage Insurance (LMI) that will protect the lender if you default.

If you think you can scrape together the rest of the deposit and you’re happy to enter the market a little later, it’s probably best to wait and avoid the extra costs.

Home loan portability

Home loan portability is a feature that lets you keep your existing home loan but transfer it to a new property. It’s an alternative to refinancing that can save you both time and money, although there may be some fees involved.

How to think about features

When comparing home loans, you should first identify the features that you absolutely need. For example, if you need a low-deposit loan because you only have 10% saved, then it doesn’t make sense to compare any loan without this feature.

After that, you should think of all the other features as nice-to-haves and decide if having any of these features is enough of a boon to counteract slightly higher rates and fees on loans that don’t offer them.

The information in this blog post is general in nature and does not constitute personal financial or professional advice. It is not intended to address the circumstances of any particular individual. We do not guarantee the accuracy and completeness of the information and you should not rely on it. Before making any decisions, it is important for you to consider your personal situation, make independent enquiries and seek appropriate tax, legal and other professional advice.

The post What home loan features do you actually need? appeared first on Credit Simple NZ.

Most home loans come with their share of fees. Don’t fret over the length of this list, as you probably won’t be subject to all of them. You may even be able to convince your lender to nix a few.

It’s also not an exhaustive list as every lender has its own fee schedule.

Without further delay… your list of the most common home loan fees you might see:

Upfront fees

These are one-off upfront fees you may encounter at the beginning of the home loan process. They may include fees to your lender and to interested third-parties like the government and your solicitor.

Upfront lender fees

• Application fee. Also be called an establishment fee and it pays for the lender to organize your loan whether you settle or not. Some lenders will waive this fee.
• Valuation fee. Pays for a qualified independent valuer to assess your home’s value. Some application fees may cover this up to a certain amount, with you paying any difference.

Upfront government fees

• Stamp duty. A percentage of the total cost of your property, which goes to your state’s revenue department (percent varies by state). It’s more of a tax than a fee.
• Mortgage registration fee. Pays the state to register the purchased property as the security on the home loan.

Other upfront fees

• Conveyancing fees. Fees paid to your solicitor or conveyancer (if you choose to use one) to help you prepare and organise your contract.

Ongoing fees

These are regular, ongoing fees you may have to pay your lender throughout the life of your loan.

• Monthly service fees. A regular monthly account-keeping fee.
• Annual fees. A yearly fee that usually only applies to package home loans, which are home loans bundled with other financial products.

Exit fees

These are one-off fees you may have to pay when you pay off or close out your loan.

• Discharge fee. Also called a settlement fee, this applies when you close out your loan (ie, pay it off, sell your property or refinance).
• Early-repayment fee. A fee for paying your loan off early. It usually only applies to fixed rate loans but not variable rate loans.

Special fees

These are fees you might have to pay if you’re taking out a special type of loan, like a fixed-rate loan or low-deposit loan.

• Rate lock fee. A special fee to lock in your rate with a fixed-rate loan.
• Security guarantee fee. A special fee that applies when you have a guarantor on your loan.
• Lenders Mortgage Insurance (LMI). An insurance premium that applies when you take out a low-deposit loan (usually under 20% deposit).
• Redraw fees. Apply when you withdraw funds from a loan account that you’ve made extra repayments into.

Bottom line

Fees are a fact of life, especially for a financial product you’ll carry with you for a long time. It’s important to become familiar with this list before you start researching home loans. That way you won’t be caught off guard when you do come across these fees in your search and you’ll know what you’re talking about when it’s time to negotiate your loan terms.

The information in this blog post is general in nature and does not constitute personal financial or professional advice. It is not intended to address the circumstances of any particular individual. We do not guarantee the accuracy and completeness of the information and you should not rely on it. Before making any decisions, it is important for you to consider your personal situation, make independent enquiries and seek appropriate tax, legal and other professional advice.

The post Home loan fees you may encounter appeared first on Credit Simple NZ.

Online home loan calculators can be among the most valuable tools you’ll find as you seek to maximise your borrowing capacity, nab the best deal and work out the most cost effective way to pay the darn thing off. 

What is a home loan calculator?

“Home loan calculator” is actually a catch-all term that applies to an entire category of calculators that each has its own function. 

For example, one type of calculator will estimate how much you can borrow, while another will let you experiment with different payment strategies. There are even calculators that will help you estimate your stamp duty based on where you plan to buy your home. 

Some require more input from you than others, so you’ll need to know what to expect from each one before jumping in.

With that in mind, here are the most popular types of home loan calculators you’ll find on the net. Keep in mind that they all provide estimates only. 

Home loan eligibility calculator

A home loan eligibility calculator helps you calculate the size of loan you may be eligible for. You’ll have to input some of your personal financial details such as:

• Your income
• Your annual expenses
• How many dependents you have 
• Any other loan repayments you are making
• The amount of interest you expect to pay
• The term (or length) of your loan

If you’ve entered everything correctly, the calculator will estimate how much you’ll be eligible for but you’ll still need to go through the application process to get the true amount. 

These can also be called borrowing calculators or borrowing power calculators. 

Loan repayment calculator

You can think of a loan repayment calculator as a mortgage calculator, since this type of calculator helps you understand the details of your mortgage once you know how much you plan to borrow. 

It will estimate how much you’ll pay on an ongoing basis, how you  will pay down your interest and principal over time and how much in total you’ll spend by the time it’s all said and done.

A loan repayment calculator doesn’t require as much input as the borrowing calculator does. 

You’ll just need to provide the following:

• How much you’ll be borrowing
• The term (or length) of your loan
• Your interest rate and whether it’s variable, fixed or introductory
• Whether you plan to repay the loan monthly, fortnightly or weekly

Home loan offset calculator

An offset account is a transaction account linked to your home loan. The more money you stash away into this account, the less you pay in interest on your home loan. 

An offset calculator lets you see how your repayment plan will benefit from a well-funded offset account.  

Other calculators

You may come across other home loan calculators, but most are just fancier versions of the loan repayment calculator:

• Extra repayments calculator. This lets you see what happens to your repayment plan if you decide to voluntarily increase your payment amount at a particular point in the future. 

• Lump sum calculator. This shows you what will happen to your repayment plan if you decide to make a large lump sum payment at some point in the future. 

• Home loan split calculator. This shows you how your repayments would look if part of your loan was set to a fixed rate and part of it to a variable rate. 

• Home loan comparison calculator.This lets you compare the repayment plan for two loans side-by-side, based on the differences in interest rates, loan term and fees. 

Who offers home loan calculators?

Nearly every home loan lender will offer a suite of home loan calculators to help you understand what you can expect when it comes time to actually apply for a loan.

Here are some Kiwi lenders who offer one or more of the home loan calculators mentioned above:

• ANZ
• ASB
• BNZ
• Westpac
• Kiwibank
• TSB
• BPI Family Housing Loan
• Kiwisaver
• Sovereign (recently acquired by AIA Group)

Each lender has different criteria it uses to work out your loan details, so each calculator might have small differences that take their particular criteria into account. 

For example, each lender will have a different fee structure, which may include an application fee and ongoing account fees (you can avoid some of these fees by taking advantage of special offers). 

That said, the calculators are only meant to provide estimates and are not considered loan offers.

The point is to educate yourself and to determine if you’re ready to take the next steps – which in most cases will be to start the application process or speak to a home loan advisor. 

What else do you need to know about getting a home loan?

Using a home loan calculator is a good way to educate yourself about how home loans and repayments work, but they aren’t the only tools you’ll need to get a full picture of your borrowing power. 

For example, they don’t take your credit score or credit history into account, and these pieces of information play a huge role in a lender’s decision to actually approve the loan.

With a free Credit Simple account, you can access your credit score and your credit history any time you want. Having this level of insight will help you work out ways to improve your score or to identify any dodgy activity like identity theft. 

We also have a learning library where you can learn to prepare for and optimise your home loan.

The information in this blog post is general in nature and does not constitute personal financial or professional advice. It is not intended to address the circumstances of any particular individual. We do not guarantee the accuracy and completeness of the information and you should not rely on it. Before making any decisions, it is important for you to consider your personal situation, make independent enquiries and seek appropriate tax, legal and other professional advice.

The post Everything you need to know about online home loan calculators appeared first on Credit Simple NZ.

So you’re in the market for your first mortgage. It’s a lot of money, right? You’re about to borrow hundreds of thousands of dollars, and no doubt you’ll want to know you’re not paying more than you need. We’ve put together a checklist for you.

Have you shopped around as well as you could?

Don’t forget this: the interest you’ll pay on your mortgage over the next 10, 20 or 30 years is worth a lot of money to someone. That means the lenders will be ready to compete to have you as their customer. If you just roll along to your current bank, they probably won’t take you past their very standard basic offering. You can almost certainly do better than that. There’s sure to be another lender out there who’s keen for your business and ready to make a deal that’s better for you. It can really pay to shop around. The question you need to be asking all the way along is, what’s the best rate I can get?

Have you negotiated as hard as you could?

After you’ve got yourself a good rate, don’t stop there. Don’t be afraid to go on asking other lenders if they can match the deal you’ve been offered. Another bank could be willing to give you a better rate if you bring the rest of your accounts to them. Have you asked if that would get you a better deal? Always be asking for that little bit extra.

Have you checked out mortgage brokers?

Brokers can be valuable because they know what their lenders are doing. They may be able to help you find a loan if a bank says no, and may be able to get a better deal than if you went direct. They know the criteria each lender uses, they know the interest rates, they can help you put a loan application together and they can do the negotiating on your behalf. However, some banks don’t deal with mortgage brokers. Different lenders pay different commission rates to mortgage brokers, so they may want to put you with a particular lender because it benefits them more, even though it may not be the best deal for you.

Have you structured your mortgage as well as you can?

Is it true what they say, that over the lifetime of the mortgage, you can end up paying twice the cost of the house? You could do, but you don’t have to. It really boils down to what your interest rate is and how long you take to repay. Let’s say you’ve bought the home of your dreams for $750,000 with a mortgage of $600,000 and you’re paying 5.3%. Over 30 years you’ll pay $1,198,878. Bring the term down to 20 years and in total it’ll cost you $973,713. But if the best rate you can get is 6.5%, then over 30 years you’ll end up paying $1,364,624 in interest and principal for the $600,00 you borrowed. The way you structure your mortgage really matters. Every little percentage point you can shave your interest rate, every month you can shorten your term, the better you’ll be doing.

So before you even start shopping for that loan, ask yourself: have you done as much as you can to get the amount you borrow down before you even start? Can you save a bit more of a deposit? Can you find a cheaper house?

So you’ll want to be making repayments as high as possible – the sooner you pay off that mortgage, the less you’ll pay in interest. Don’t just accept the term the lender sets you. If you think you can get it done in 20 years, don’t settle for 30.

What else? Four more tips for first timers

Get yourself an account that links your savings account to your loan. Even if your savings don’t earn any interest, it reduces the amount you’d pay on the loan. The same goes for a revolving mortgage, where your pay goes into your mortgage account and you spend from there. This also reduces the amount of your loan accruing interest.

Make sure you’re not in too deep. That 95% loan may sound great, until it’s time to pay it back. Be sure you’ve had a clear-eyed look at what you can afford to spend, and what would happen if any of you income dried up.

It’s just as important to make sure you’re not borrowing more than you need. Some lenders may try to tempt you into borrowing more, because that’s great business for them.

Check out an online mortgage calculator. It’s easy to get a very clear idea of the many options you have to structure your mortgage by crunching the numbers again and again, trying out all the different possibilities, so make an online mortgage calculator your friend. Most of the lenders have them on their sites. Don’t brush past them, there are many thousands of dollars at stake and it’s all your money!

The post What you need to know: Four questions to ask before you get your first mortgage appeared first on Credit Simple NZ.

For most of us, there’s nothing we spend more on each month than our mortgage. So there’s never a month where it’s not worth asking: “Could I be doing better? Could I be getting closer to paying it off? Could I be paying a bit less in interest?” Here are our top tips for making sure you’re putting the least in and getting the most out.

Push your bank a bit harder

It’s always worth bearing in mind that banks don’t usually do as good a deal on home loans as they could for one very important reason: they don’t need to. If you push a bit harder they will, but most people don’t. Here’s what you can do to get a better deal, according to Scott Pate of the Barefoot Investor:

Don’t get seduced by fancy extras

Things like repayment holidays and special features may look appealing but there’s a good chance they actually seduce you into paying for things you won’t use much, if at all.

Fixed rates might look good, but they may shut you out of a better deal

If you want to know for sure that for the next five years you’ll be paying a certain amount then fixing your rate is worth it, but what if you see a better deal six months from now? If you fixed your rate, you may not be able to move over to that deal or if you do, there may be penalties.

Push hard to get the cheapest rate possible

It may cost your bank a decent amount of money in marketing costs to replace you. That equals bargaining power. If you call and tell them you’ve applied to refinance with another bank and their rate is a certain amount cheaper than you’re currently being charged, and that you’d like them to match the offer or send you the forms you need to switch, you may well get a better rate. If they don’t match it, it may be worth saying “that’s not good enough” and ask if they would speak to their supervisor.

Sound like a hassle? It can be. But is it worth it? You bet it is. Let’s say you get them to drop your rate 0.5 per cent. Apply that to the cost of your mortgage over say 15 or 20 years and look how much that phone call will be worth to you if they come to the party. That’s some serious money, and well worth your time.

Put that foot on the accelerator and get the debt down faster

Can you find another $500 or $1000 a month to pay off your mortgage each month? Put it another way: would you like to have your mortgage paid off three or five or seven years sooner? A small amount extra each month can make real inroads into that debt. If you just make the minimum payment, that works a lot better for the lender than it does for does for you.

So what can you do to get it paid off faster?

Make higher repayments than you have to. As long as there is no penalty for doing so, top up your repayment whenever you can and add extra lump sums as you go.

Go fortnightly. Can you pay half your monthly amount each fortnight? If you can, you’ll end up making more payments for the year.

Act like you didn’t get a break. Has your interest rate dropped? Good – don’t drop your repayment level and you’ll be making more progress.

Act like you’re not doing better. Had a pay rise? Don’t live like you have, keep spending the way you were and put the rest into your mortgage.

Shrink the calendar. Can you shorten the term of your loan? If you can cope with an increase in your repayments, do it, it’ll make a big difference.

The post How to make your mortgage work better (and harder) for you appeared first on Credit Simple NZ.

A mortgage can easily end up costing you thousands more than it needs to, maybe tens of thousands, if you’re not always looking for the best deal. Sometimes you can do better by refinancing to a mortgage with a lower interest rate. But it’s not something you want to be doing without some careful preparation and homework.

What do you need, and what will it cost you to change?

Before you start refinancing, find out exactly how much you need to borrow. If you just make your own rough guess, you could end up borrowing too little or too much. Ask your lender exactly how much you’ll need to pay to clear the mortgage on a specific date. You also need to establish if there are any fees or charges for early repayment.

It’s possible that refinancing could end up costing more than you expect. You need to be sure that what you save on interest payments won’t be wiped out by ongoing fees or charges for making the switch. That could include:

• Early repayment fees
• Application fees from the new lender
• Legal costs
• Valuation costs

Have you sorted out your finances and got your credit file looking as good as it can?

Before you start knocking on doors for your refinancing deal, you want to make sure the lenders will be seeing you at your best. They like to see that you’re managing your money well, and that you’re in a position to pay them on time. So here are some things to be especially mindful of in the weeks and months before you start making an application.

• No, or few, other applications for credit
• No erratic or heavy spending
• Keep out of your overdraft
• Make sure your credit report looks as good as it can, and that there are no errors in it that could count against you.

Now would be a good time to look through your score and reports (click here to check yours with Credit Simple instantly and free).

It used to be that lenders would just multiply your main income by up to five times to work out your maximum remortgage size. These days it’s more complicated. They’ll look at all the numbers to work out if you can afford the repayments. That means all your debts, all your outgoings, your basic salary and any other relevant income. You can use our free online spend tracker Money Simple to get a good handle on this and see if there’s anything you can adjust to make your spending look better to home loan providers.

What if it all goes wrong?

So you make your application and you wait to hear back and … bad news. Turned down.

Here’s what not to do: don’t immediately apply somewhere else, because if you get turned down again, you’re going to start looking less shiny on your credit file and that can turn into a bad spiral as the next lender and the one after that turns you down because … your credit report isn’t looking that good because people have been turning you down.

If you get rejected, stop right there and take careful stock of everything in your credit status, and work out if anything needs fixing before you apply again.

The post Mortgage intel: How to refinance your home loan appeared first on Credit Simple NZ.

Us Kiwi’s have made the most of peer-to-peer as a way of life for some time now, adopting services such as UBER, Airbnb and Airtasker and enjoying better value all round.

Neil Roberts Joint CEO of Harmoney says it has been very rewarding watching Kiwis embrace the Harmoney peer-to-peer lending marketplace.

“The growth has been fantastic, but the passion that comes from our community and their continued support for Harmoney is perhaps the most rewarding of all.”

Thanks half a billion

Harmoney want to say a big THANK YOU to all their Harmoney lenders and borrowers who’ve embraced Kiwi ingenuity and helped Harmoney lend more than $500 million through the platform in just under three years!

Collectively they have been able to help more than 30,000 Kiwis make their everyday finances that little bit more manageable and make things happen.

The post Lending and borrowing the Kiwi way appeared first on Credit Simple NZ.

Technology has become a crucial part of our everyday lives. Whether it’s talking, texting, catching up with family on social media or searching for the latest recipe to cook for dinner. However technology is increasingly becoming more expensive.

Here are some tips to save money.

1. Understand your bills

Understand the plan you are currently on. What are the fees and charges?

Go through your bills and make sure you understand what the items are you are being charged for. If you don’t understand a line item on the bill call up your provider to get clarification or consider if you could remove any features. Alternatively, it might be time to switch providers altogether.

2. Research and Negotiate Your bill

Once you understand your bill, research other plans on the market. Are there better deals out there where you could be saving?

We have great offers on in your Credit Simple dashboard that might save you money. You can see them here. You can also try to negotiate with your current provider. Even if there isn’t another ISP in your area, it may be possible to ask for a bill reduction by citing your excellent payment history and complaining about service failures and slow speeds, if relevant. If they won’t meet your demands, go ahead and consider if a switch is right for you.

3. Avoid Late Fees (or call to cancel them)

All those little fees do add up. So it’s important that you pay your bills on time. However, we understand that from time to time life happens to get in the way and you may miss a payment deadline. You may be able to call your provider and request to have that late fee forgiven in certain circumstances. Another tip to avoid late fees is to set up a direct deposit.

4. Free calls – VoIP Services

Voice over Internet Protocol (VoIP) is a fancy term for the type of online services that allow you to make phone calls through an internet connection, such as Facetime, Whatsapp or Skype.  Sometimes, you can even chat for free using these services—especially if it’s a local call. All three services have an application you can download on your mobile phones.

Got any tips that have worked with for you. Share them with the credit simple community: Marketing@creditsimple.com.au

The post Tips to save everyday on technology appeared first on Credit Simple NZ.

So you’ve got a big bad black mark on your credit record and you want a mortgage? Don’t worry, all is not lost.

Banks like to lend to people who they believe have the disposable income and the will to pay them back. If your credit score is bad and there are a few sneaky black marks on it they might think that you’re not such a good bet.

Banks have to be responsible

What’s more, our banks are also governed by a little piece of legislation called the Responsible Lending Code. The gist of that law is that banks aren’t allowed to lend to you if you can’t afford to pay them back. They have to err on the side of caution when lending or find themselves in hot water. The law is designed to protect you from yourself and also lenders from being driven by the almighty dollar rather than your welfare. Sometimes rules like this backfire, meaning that potentially worthy customers can’t borrow.

The good news is that for many people in your situation there is still hope. You might even be able to clean up your credit score at the same time as paying a mortgage.

How to qualify for a home loan with bad credit

Where there’s a will, there’s a way says mortgage broker Jeff Royle of iLender. Steps to take if you find that your bank won’t lend include the following.

Be honest with yourself
Even though most people blame others for their black marks, the reality is that it’s often down to the way you’ve managed your finances. Take ownership. This will help you clean up your credit, but also approach lenders in the right frame of mind.

Tell the truth to the bank
Royle points out that banks aren’t happy if they catch you hiding your defaults. He’s seen borrowers turned down when the bank stumbles upon their credit black marks. Honestly is the best policy.

Get a broker
Mortgage brokers go into bat on your behalf and sometimes plead your case if your loan application is borderline. They can also be quite clever in how they package you to the lender. That’s not lying, but emphasising the positive aspects of your application. “It can be a jigsaw where seven of the eight pieces are good and one is not,” says Royle. They take these pieces and paint a picture of you that the bank might understand. Mortgage brokers also use a panel of banks, non-bank lenders and finance companies, and know which are most likely to accept borrowers in your position. Each lender has its own rules and it may be that you will be accepted by one, but not the others.

Turn over a new leaf
If painting a picture doesn’t work there are other options to improve the odds of approval. A good mortgage broker will school you in how to become a good financial citizen in the eyes of the bank. After six months of consistently good financial behaviour the lender may reconsider your position.

Clean up your credit
Start by paying off any outstanding debts that have led to defaults. Then ask the lenders to mark them as paid. Royle points out that some credit providers such as ACC, utilities companies and government departments load defaults quickly.

Get a bigger deposit
Thanks to the government’s loan to value ratio (LVR) rules you already need to stump up a pretty sizeable deposit. The higher your deposit, however, the less likely you are to be stretching your financial resources, which makes you more acceptable as a borrower.

Borrow from a non-bank
Mortgage brokers such as Royle have access to non-bank lenders and finance companies that both offer home loans. These loans can be more expensive, but not always. In the short term they can be a life saver and once you’re on the housing ladder you can often refinance into a bank six months or a year down the track, says Royle.

Finally, if you do get a home loan, make absolutely sure you never miss a payment, even if it means going without luxuries such as lunches out, new technology or whatever your poison is. If you pay each and every month on time you’ll soon start to build up your score making it easy to borrow next time or refinance. Start budgeting so that you never ever miss a payment and learn to spend within your means.

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