What Happens When You Declare Bankruptcy and Buying A Home

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What Happens When You Declare Bankruptcy and Buying A Home

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Although bankruptcy has many financial consequences, it surely does not suggest the end of the world. Many folks file for bankruptcy for a number of reasons, and this figure only intensifies with the harsh economic conditions that we witness today. According to information from the Australian Financial Security Authority (AFSA), there were 7,466 cases of bankruptcy in Australia in the September 2014 quarter alone. Seeking bankruptcy advice is imperative so you become mindful of exactly what transpires financially when you declare bankruptcy.

There are two categories of bankruptcy: undischarged bankruptcy and discharged bankruptcy. Undischarged bankruptcy signifies that you’re still in the process of bankruptcy and are unable to obtain any kind of loan. Discharged bankruptcy means that you are no longer bankrupt, and can obtain a loan with several specialist lenders. Bankruptcy generally lasts for three years however can be extended in some instances.

Unfortunately, the banks do not provide the reasons for your bankruptcy and this can make it considerably difficult to get a home loan approved once you are eventually discharged. Whether you’ll have the capacity to buy a home after bankruptcy depends on a number of factors, like the kind of loan you’re seeking and how you control your credit rating once declared bankrupt. What is definite is that your spending power will be restricted, and repossession of property is normal.

Can you get a home loan approved after bankruptcy?

There are a variety of specialist lenders offering home loans to borrowers that have been discharged from bankruptcy for as little as one day. While many of these loans have a higher interest rate and fees, they are nonetheless an option for people that are interested. In most cases, a larger deposit is needed and there are stricter terms and conditions in comparison to regular home loans.

There are plenty of differences among lenders for discharged bankruptcy loan approvals. Some lenders will even supply reduced rates to those people whose finances are in good condition and who have good rental history, if relevant. The period of time between your discharge and loan application will also affect the result of your application. Two years is generally recommended. On top of that, sustaining a stable income and employment are also details which will be taken into account. Most bankrupt people will also proactively try to improve their credit rating immediately to decrease the strain of bankruptcy once discharged.

Things to consider when applying for a home loan once discharged.

Choosing a suitable lender is essential, so it’s a good idea to choose a lender that not only provides loans to discharged bankrupts but one that is widely known and trustworthy. By doing this, you will feel comfortable that you’re getting decent terms and conditions and your application is more likely to be approved. There are several unreliable lenders on the market that take advantage of the financially vulnerable, so please beware. Another significant aspect to take into account is that you should not apply to more than one lender simultaneously. Every loan application surfaces on your credit history, and numerous applications all at once are viewed negatively by lenders.

Pros and cons of home loans for discharged bankrupts

Pros

You can still a loan. Though it may be complicated, it is still feasible for discharged bankrupts to get a home loan approved.

The longer you’ve been discharged, the easier it gets. Spending time restoring your finances shows the lenders that you are financially responsible.

Your credit rating will improve. Basic tasks such as paying your bills on time and producing steady income will improve your credit rating.

Cons

You can’t get a loan until you are discharged. Most lenders will not approve any loans to those that are undischarged to avoid risking any further financial hardship.

Increased rates and fees. Usually, interest rates and fees will be higher for discharged bankruptcy loans. You can only acquire lower interest rates with a larger deposit.

Record of bankruptcy. You will have a record of bankruptcy on your credit history for seven years after discharge, and your name will always appear on the National Personal Insolvency Index (NPII).

 

Bankruptcy is never an enjoyable experience, but it does not imply that you will never own a home again. As a result of the complexity of bankruptcy, it’s imperative to seek professional advice from the experts to make certain you understand the process and therefore make sound financial decisions. For more details or to speak with someone about your situation, contact Bankruptcy Experts Sunshine Coast on 1300 795 575 or visit http://www.bankruptcyexpertssunshinecoast.com.au

By | 2017-10-11T06:15:17+00:00 April 21st, 2017|Bankruptcy, Liquidation|0 Comments

About the Author:

Director of Fresh Start Solutions and specialises in helping people free themselves from overwhelming debt. Whether it's Bankruptcy, Liquidation, Insolvency Advice or simply General Debt Advice.