Bad Credit & Non-Conforming Home Loans

Bad credit covers any negative mark on your credit file: defaults (unpaid bills over $150 listed by a creditor), court judgments, bankruptcies, part IX debt agreements, or multiple missed payments on credit cards or loans. Even a single missed mortgage payment can flag your file as higher-risk with major banks. Specialist non-conforming lenders assess each event individually—how old it is, how much was owed, whether it’s paid or discharged, and what your financial behaviour looks like now. A $2,000 default from four years ago that’s been paid is treated very differently from a $15,000 judgment from six months ago that’s still outstanding.

Yes—defaults don’t automatically disqualify you from a home loan. Specialist non-conforming lenders look at the age of the default, the amount, and whether it’s paid. A single default under $5,000 that’s older than 24 months and paid in full is usually acceptable at 75%–80% LVR with a 20%–25% deposit. Multiple recent defaults or a large unpaid default will push you toward lenders who cap LVR at 70% and require a 30% deposit. Andy pulls your credit report, shows you exactly what’s listed, and tells you which lenders will work with your file. Around 60% of the non-conforming loans he places involve at least one default—it’s common and workable.

Non-conforming home loan rates in Perth typically range from 8.0% to 10.5% variable as of mid-2024, compared to 6.0%–7.0% for a standard home loan. The exact rate depends on your LVR, the severity and age of your credit event, and which lender Andy places the file with. A client with a single old default at 75% LVR might get 8.2%; someone with a discharged bankruptcy at 70% LVR might see 9.8%. Andy shows you the real repayment difference: on a $450,000 loan, the gap between 6.5% and 9.0% is roughly $680/month. The higher rate isn’t forever—you refinance back to a prime lender once your credit file improves, usually within 18–36 months.

Most specialist lenders require a 20%–30% deposit plus stamp duty and other costs. The exact figure depends on your credit history: a single old default might get you approved at 80% LVR (20% deposit), while a recent bankruptcy or multiple defaults may cap you at 70% LVR (30% deposit). On a $500,000 property in Mandurah, a 20% deposit is $100,000 + $17,765 stamp duty (WA, non-first-home-buyer) + $3,000–$5,000 other costs = roughly $121,000–$123,000 total cash required. Andy works backward from the cash you have to show you what purchase price and which lenders are realistic.

Yes—refinancing is the standard exit strategy. Most borrowers move from a non-conforming loan back to a major bank within 18–36 months once they’ve demonstrated clean repayment behaviour and their credit score recovers. You typically need 12–18 consecutive on-time repayments, a credit score above 650, and no new credit events. Andy structures the initial non-conforming loan with refinancing in mind: he picks lenders with low or zero discharge fees, avoids long fixed-rate terms that lock you in, and chooses products with offset or redraw so your savings reduce interest while you wait. One Rockingham couple refinanced after 14 months, dropping their rate from 9.1% to 6.6% and saving $560/month.

Yes—most specialist lenders require a statutory declaration or written explanation if your credit event is recent (within 24 months) or significant (bankruptcy, large judgment, multiple defaults). The explanation should be factual and brief: what happened (job loss, medical issue, business failure, relationship breakdown), what you did to resolve it (payment plan, debt discharged, bankruptcy finalised), and what your financial position is now (stable income, consistent savings, clean payment record since). Andy helps you draft this so it’s clear and credible. Lenders want to see you’ve moved past the event—they’re not looking for excuses, just evidence of current financial discipline.

Yes—many non-conforming borrowers are self-employed or have non-standard income. Specialist lenders assess bank statements (typically 3–6 months) showing consistent deposits, ABN invoices, business activity statements, and your savings pattern. You don’t always need two years of tax returns, which is what major banks require. If you’ve got a 12-month ABN history, regular client invoices, and a strong deposit, lenders like Liberty and Pepper Money will consider your file. Andy also works with low-doc products that rely more heavily on your deposit size and less on income documentation—see the self-employed & low doc home loans page for more detail on that structure.

A discharged bankruptcy stays on your credit file for five years from the discharge date (or two years if you were automatically discharged). Most non-conforming lenders will consider your application once the bankruptcy is discharged and you’ve rebuilt some credit history—usually 12–24 months post-discharge. You’ll need a larger deposit (25%–30%) and you’ll pay a higher rate (9%–10.5%), but approval is possible. One Perth client had a bankruptcy discharged in 2020; by mid-2023 he had 18 months of clean rental payments, a 28% deposit, and stable PAYG income. We placed him with a specialist lender at 9.4% on a $380,000 loan. Within two years his credit score will be high enough to refinance to a major bank.

Specialist lender approvals typically take 5–10 business days for conditional approval, then another 10–14 days for valuation, final conditions, and settlement docs. Total timeframe from lodgement to settlement is usually 3–5 weeks, slightly longer than a standard bank loan. The main delay is the lender’s credit assessment—they manually review your file, your credit report, and your supporting documents rather than relying on automated serviceability calculators. Andy manages the timeline and keeps you updated at each stage so you know when to expect conditional approval and when settlement will happen.

Sometimes—a guarantor with strong credit can help you qualify for a standard home loan instead of a non-conforming product, especially if your credit event is minor or old. The guarantor (usually a parent) uses equity in their property to cover part of your deposit or act as additional security, which reduces the lender’s risk and can offset a lower credit score. But guarantor loans require the guarantor to meet the lender’s serviceability and credit tests, and not all parents are comfortable taking on that legal liability. Andy walks through both options—guarantor loan vs non-conforming loan—and explains the cost, risk, and approval likelihood of each. See the guarantor home loans page for full detail on how that structure works.

Bad credit refers to your credit history (defaults, judgments, bankruptcies). Low doc refers to your income documentation—you’re self-employed, a contractor, or have income that doesn’t fit standard PAYG payslip proof. Some borrowers need both: a low-doc structure because they’re self-employed, and a non-conforming lender because they have a credit event. Other borrowers have perfect credit but need low doc because they’ve only been self-employed for 12 months. Andy matches your file to the right product: if you’re PAYG with a default, that’s a standard non-conforming loan; if you’re self-employed with clean credit, that’s a low-doc loan with a prime or near-prime lender; if you’re self-employed with a default, that’s a non-conforming low-doc loan with a specialist panel.