What Happens When You Declare Bankruptcy and Buying A Home

While bankruptcy has many financial impacts, it certainly doesn’t mean the end of the world. Lots of folks file for bankruptcy for plenty of reasons, and this amount only intensifies with the harsh economic conditions that we witness today. According to statistics from the Australian Financial Security Authority (AFSA), there were 7,466 cases of bankruptcy in Australia in the September 2014 quarter alone. Getting bankruptcy advice is imperative so you become informed of exactly what transpires financially when you declare bankruptcy.

There are two types of bankruptcy: undischarged bankruptcy and discharged bankruptcy. Undischarged bankruptcy implies that you are still in the process of bankruptcy and are incapable to acquire any kind of loan. Discharged bankruptcy means that you are no longer bankrupt, and can obtain a loan with various specialist lenders. Bankruptcy normally lasts for three years however can be extended in some circumstances.

Sadly, the banks do not list the reasons for your bankruptcy and this can make it considerably difficult to get a home loan approved when you’re eventually discharged. Whether you will be able to buy a home after bankruptcy rests on various factors, for instance the kind of loan you’re looking for and how you take care of your credit rating once declared bankrupt. What is definite is that your spending ability will be limited, and repossession of property is normal.

Can you get a home loan approved after bankruptcy?

There are a range of specialist lenders supplying home loans to clients that have been discharged from bankruptcy for as little as one day. Whilst many of these loans have a higher interest rate and charges, they are still an option for individuals that are eager. In most cases, a bigger deposit is needed and there are more stringent terms and conditions in comparison to standard home loans.

There are plenty of differences amongst lenders for discharged bankruptcy loan approvals. A couple of lenders will even offer reduced interest rates to those whose finances are in good condition and who have good rental history, if applicable. The amount of time between your discharge and loan application will similarly affect the result of your application. Two years is usually advised. In addition, sustaining a stable income and employment are also factors which will be taken into account. Many bankrupt people will also actively attempt to increase their credit rating quickly to decrease the difficulty of bankruptcy once discharged.

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

Choosing a suitable lender is very important, so it’s a smart idea to go with a lender that not only provides loans to discharged bankrupts but one that is well-known and credible. By doing this, you will feel confident that you are receiving fair terms and conditions and your application is more likely to be approved. There are some dubious lenders on the market that exploit the financially vulnerable, so please beware. Another key factor to consider is that you should not apply to more than one lender at a time. Every loan application surfaces on your credit history, and several applications at the same time are seen negatively by lenders.

Pros and cons of home loans for discharged bankrupts

Pros

You can still a loan. Even though it may be tough, it is still attainable for discharged bankrupts to get a home loan approved.

The longer you have been discharged, the easier it gets. Spending time rebuilding your finances shows the lenders that you’re 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 obtain a loan until you are discharged. Almost all lenders will not approve any loans to individuals that are undischarged to avoid risking any additional financial distress.

Increased rates and fees. In general, interest rates and fees will be increased for discharged bankruptcy loans. You can only receive lower interest rates with a bigger 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 be on the National Personal Insolvency Index (NPII).

Bankruptcy is never a pleasant experience, but it doesn’t indicate that you will never own a home again. Because of the intricacy 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 talk with someone about your scenario, contact Bankruptcy Experts on 1300 795 575 or visit https://bankruptcy-australia.net.au