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Credit-impaired refinancing · Victoria
Check whether refinancing solves the problem—or adds to it
If repayments have been missed or your credit file has changed, refinancing may be harder and the available loan may cost more. Chris Berry helps Victorian homeowners compare the current loan, equity, arrears, credit history and realistic alternatives before applying.
Confidential mortgage guidance across Victoria
The short answer
Can I refinance my mortgage with bad credit?
It may be possible if your income supports the new loan, there is sufficient equity, the property is acceptable and a lender’s policy accommodates the credit history. However, refinancing is not automatically beneficial: rates, fees, a longer loan term and debt consolidation can increase total cost, so the outcome must be compared with staying, negotiating hardship support or preparing first.
Assess before applying
Start with the reason for refinancing
A lower monthly repayment can come from a better rate, a longer term, debt consolidation or a combination of these. Each produces a different long-term result.
- Compare the current loan and proposed refinance on both repayments and total cost
- Confirm property value, mortgage balance, arrears and usable equity
- Review recent repayment history, defaults, hardship information and other debts
- Avoid relying on an unguaranteed future refinance to justify an unaffordable loan
Loan term
Extending the remaining term can reduce the monthly amount while increasing the interest paid over time.
Equity position
Current value and debt determine the loan-to-value ratio. Capitalising arrears, fees or other debts can use more of the available equity.
Hardship alternatives
If the problem is temporary payment difficulty, speaking with the current lender’s hardship team may be more appropriate than immediately refinancing.
Understand the trade-offs
Refinance now or stabilise first?
The best result is not necessarily a new lender. Compare all realistic options against affordability, total cost and the consequences if circumstances change.
Decision point
Explore refinancing now
Stabilise or seek support first
Repayment status
The position fits available policy and the new repayment is sustainable.
Current arrears or hardship require an immediate discussion with the lender.
Equity
The valuation supports the proposed loan and all refinance costs.
The loan-to-value ratio is too high for realistic policy or pricing.
Benefit
Verified savings or structural benefits outweigh switching costs.
Lower repayments rely mainly on extending the term or increasing total debt.
Credit enquiries
A targeted application has been assessed before submission.
More preparation can avoid multiple declined or speculative enquiries.
How it works
A considered path before any application.
- 01
Collect the current loan statement, repayment history, credit reports, income, expenses, debts and a property estimate.
- 02
Compare staying, hardship support and realistic refinance scenarios including fees and total interest.
- 03
Proceed only where the new loan is suitable, affordable and supported by lender policy and evidence.
Common questions
Clear answers for Victorian borrowers
Can refinancing clear mortgage arrears?
A refinance may sometimes include eligible arrears if policy, equity and serviceability permit, but it converts the amount into the new loan and may add fees and interest. It should not be treated as guaranteed relief.
Can I consolidate debts into my home loan with bad credit?
Some lenders may consider it, but moving short-term debt into a mortgage can increase the time you pay interest and places the home at risk if repayments cannot be maintained.
Should I contact my lender if I am struggling with repayments?
Yes. Contact the lender’s hardship team promptly. Free financial counselling is also available through the National Debt Helpline. Seeking help early can provide more options.
Will refinancing remove defaults from my credit report?
No. Refinancing does not remove accurate credit-report information. Paid amounts can be updated as paid, and incorrect information can be challenged through the appropriate correction process.
How do I know if a refinance saves money?
Compare the interest rate, all switching costs, the remaining and proposed loan terms, any debt added to the loan and the total repayments over the period you expect to keep it.
Reviewed 14 September 2026 by Chris Berry. General information only, not legal, credit-repair or financial-hardship advice. Approval is not guaranteed; lender eligibility, rates, fees and loan-to-value limits vary.
Official information: Moneysmart mortgage hardship · National Debt Helpline
Ready when you are
Let’s find your better rate.
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