Can You Get a Mortgage With Defaults in Australia? (2026)

Quick Answer: Yes — you can get a mortgage with defaults in Australia through specialist and non-conforming lenders like Pepper Money, La Trobe Financial, and Bluestone. However, rates run 2–4% higher than mainstream mortgages, adding hundreds of thousands in interest over 30 years. If your default was listed in breach of the Privacy Act 1988 — no Section 21D notice, listed during a dispute, or incorrect amount — professional removal typically takes 30–90 days and opens mainstream lender approval at dramatically better rates.

A default on your credit file doesn't automatically close the door to homeownership. But it does change the door you walk through — and what you pay on the other side. Before you accept a specialist mortgage at a painful rate, it's worth knowing whether the default blocking you should legally even be there.

How Mortgage Lenders Treat Defaults

Australian mortgage lenders fall into three broad groups when it comes to defaults on a credit file.

Major banks (CBA, ANZ, Westpac, NAB) apply automatic decline rules for any active default, regardless of amount or age. Their credit decisioning systems flag the default and reject the application before a human reviews it. Income, deposit, and employment history do not overcome an active default at this level.

Tier 2 banks and credit unions (Suncorp, Bendigo, ING, Heritage) take a slightly more flexible approach. Minor or older defaults — particularly small amounts listed more than two years ago — may be assessed manually, giving a human underwriter the opportunity to consider the full picture.

Non-conforming and specialist lenders (Pepper Money, La Trobe Financial, Bluestone, Resimac) specifically exist to serve borrowers with impaired credit files. They will consider active defaults, multiple defaults, and discharged bankruptcies. The trade-off is a higher interest rate and stricter LVR requirements.

The Cost of a Mortgage With an Active Default

These figures are indicative and assume a 30-year principal and interest loan. Even a two-year stint at specialist rates before refinancing involves tens of thousands in additional interest. The question is always: can the default be removed before you commit to those terms?

Real Case Study: Lena, Gold Coast — Accepted Specialist Rate vs. 47-Day Wait

Lena, 38, a dental practice manager from the Gold Coast, had saved a 22% deposit after seven years of disciplined saving. Her only barrier to mainstream mortgage approval was a $480 Optus default listed four years earlier — a disputed final bill she'd contested at the time but never formally escalated.

A specialist lender had offered her approval at 9.4% p.a. on a $520,000 loan. Her broker told her it was her best option.

During her ACS assessment, we found the default had been listed while Lena had a formal complaint lodged with the Telecommunications Industry Ombudsman — a direct breach of the Credit Reporting Code, which prohibits listing during active dispute resolution.

We challenged the listing. Optus acknowledged the breach. The default was removed on day 29.

Lena's Equifax score moved from 509 to 731. She reapplied through a major bank. Approved at 6.31% p.a.

Result: Lena's score moved from 509 to 731 in 29 days. On her $520,000 mortgage over 30 years, the rate difference between 9.4% and 6.31% saved her approximately $338,000 in interest. She waited 47 days from first contact with ACS to unconditional approval. She paid nothing until we succeeded. Subject to individual assessment; results may vary.

When to Accept a Specialist Mortgage Now

There are situations where applying with a specialist lender immediately makes sense — when the purchase is time-critical, when the default was lawfully listed and removal isn't viable, or when your financial position requires the stability of owning rather than renting. In those cases, consider a two-step strategy: accept the specialist rate now, and plan to refinance within 12–18 months once your credit file improves through positive repayment history and/or entry expiry.

Always get a free credit assessment before signing any specialist mortgage. Spending 24 hours on assessment could save you decades of extra repayments.

Steps to Getting a Mortgage With Defaults

1. Pull all three credit reports — Equifax, Experian, Illion — to know exactly what lenders will see
2. Get every default assessed — identify listing date, amount, creditor, and whether the Section 21D process was followed
3. Challenge unlawful defaults first — if grounds exist, removal typically takes 30–90 days
4. If removal isn't viable, engage a specialist mortgage broker — someone with access to Pepper, La Trobe, Bluestone, and Resimac
5. Present the strongest possible application — 6+ months bank statements, 2 years tax returns, stable employment evidence, and a genuine savings history
6. Set a refinance target — if you accept a specialist rate, plan your path to mainstream within 12–24 months

Frequently Asked Questions

Can I get a home loan in Australia with a paid default? A paid default is still visible on your credit file and still causes most mainstream banks to decline your application automatically. The status changes from "default" to "paid default" but the listing remains for the full 5-year period. Specialist lenders will consider paid defaults — often at slightly better rates than active defaults — but the rate premium over mainstream lending is still significant.

How many defaults can you have and still get a mortgage? There's no universal rule. Most non-conforming lenders will consider one or two defaults below $1,000 with at least 12 months since listing. Multiple defaults, large defaults, or recent defaults significantly narrow your options and push rates higher. The more defaults, the more important it becomes to assess whether any can be removed on legal grounds before applying.

Does the age of a default matter for mortgage approval? Yes. Most specialist lenders treat defaults listed more than two years ago more favourably than recent listings. Some will consider mainstream-adjacent rates for old, small, paid defaults in otherwise strong applications. A default listed in the last 12 months is the hardest barrier to overcome.

Do I need a bigger deposit if I have defaults on my file? Typically yes. Non-conforming lenders generally require a minimum 20% deposit (80% LVR) for applicants with defaults, compared to the 5–10% some mainstream lenders accept for clean-credit borrowers. A larger deposit reduces the lender's risk and can partially offset the credit risk in their assessment.

How long after a default is removed can I apply for a mortgage? Immediately. There's no mandatory waiting period once a default has been professionally removed from your file. Most ACS clients apply within days of removal confirmation, and approval typically follows within 2–4 weeks for well-prepared applications.

Can I use a mortgage broker if I have defaults? Absolutely — and you should. A good specialist mortgage broker has access to lenders who aren't on public comparison sites and knows which lenders will consider your specific credit profile. Look for brokers accredited with the Mortgage & Finance Association of Australia (MFAA) or Finance Brokers Association of Australia (FBAA) at asic.gov.au.

Don't Sign a Specialist Rate Until You've Done This

A 24-hour free assessment could tell you whether the default blocking your mainstream approval should legally even be on your file. If it can be removed, the difference in total mortgage cost is often measured in hundreds of thousands.

Australian Credit Solutions is ASIC-licensed (ACL 532003), lawyer-led by Principal Solicitor Elisa Rothschild, and has helped over 5,000 Australians access the home loan they deserved since 2014. No Win No Fee. 98% success rate on accepted cases.

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Australian Credit Solutions Pty Ltd holds Australian Credit Licence ACL 532003. Credit repair services are subject to individual assessment. Results may vary. General information only — not legal or financial advice. External resources: ASIC MoneySmart | Equifax Australia | AFCA

Related reading: Bad Credit Home Loans → | Default Removal Services → | Credit Repair for Home Loan Approval →