What Happens When You Declare Bankruptcy and Buying A Home
Although bankruptcy has many financial consequences, it certainly doesn’t suggest the end of the world. Lots of individuals file for bankruptcy for plenty of reasons, and this number only grows with the challenging economic conditions that we witness today. According to reports from the Australian Financial Security Authority (AFSA), there were 7,466 episodes of bankruptcy in Australia in the September 2014 quarter alone. Seeking bankruptcy advice is vital so you become mindful of exactly what happens financially when you declare bankruptcy.
There are two kinds of bankruptcy: undischarged bankruptcy and discharged bankruptcy. Undischarged bankruptcy signifies that you are still in the process of bankruptcy and are not able to obtain any type of loan. Discharged bankruptcy indicates 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 scenarios.
Unfortunately, the banks don’t list the reasons for your bankruptcy and this can make it particularly difficult to get a home loan approved when you’re ultimately discharged. Whether you’ll be able to buy a home after bankruptcy depends on various factors, including the type of loan you’re after and how you deal with your credit rating once declared bankrupt. What is certain is that your spending capability will be constricted, and repossession of property is standard.
Can you get a home loan approved after bankruptcy?
There are a number of specialist lenders granting home loans to customers that have been discharged from bankruptcy for only one day. Whilst many of these loans feature a higher interest rate and fees, they are nevertheless an option for individuals that are eager. Much of the time, a bigger deposit is needed and there are more stringent terms and conditions compared to normal home loans.
There are various differences between lenders for discharged bankruptcy loan approvals. A couple of lenders will even supply reduced rates to those whose finances are in good shape and who have good rental history, if applicable. The length of time between your discharge and loan application will similarly influence the end result of your application. Two years is generally advised. Furthermore, maintaining a consistent income and employment are also matters which will be considered. A lot of bankrupt people will also actively attempt to improve their credit rating immediately to reduce the difficulty of bankruptcy once discharged.
Factors to consider when applying for a home loan once discharged.
Selecting a suitable lender is critical, so it’s a good idea to choose a lender that not only grants loans to discharged bankrupts but one that is widely known and respectable. By doing this, you’ll feel confident that you’re receiving fair terms and conditions and your application is more likely to be approved. There are a few suspicious lenders on the market that take advantage of the financially vulnerable, so please beware. Another useful variable to take into account is that you should not apply to more than one lender at a time. Every loan application surfaces on your credit history, and numerous applications all at once are seen negatively by lenders.
Pros and cons of home loans for discharged bankrupts
You can still a loan. Despite the fact that it may be difficult, it is still possible for discharged bankrupts to get a home loan approved.
The longer you have been discharged, the easier it gets. Spending time rebuilding your finances demonstrates to the lenders that you’re financially responsible.
Your credit rating will improve. Effortless tasks like paying your bills on time and generating steady income will improve your credit rating.
You can’t get a loan until you are discharged. Many lenders will not approve any loans to people that are undischarged to avoid jeopardizing any additional financial distress.
Increased rates and fees. Usually, interest rates and fees will be higher for discharged bankruptcy loans. You can only get 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 a pleasant experience, but it doesn’t indicate that you’ll never own a home again. Because of the complexity of bankruptcy, it’s crucial to seek professional advice from the experts to make sure you understand the process and therefore make prudent financial decisions. To learn more or to talk to someone about your scenario, contact Bankruptcy Experts Ipswich on 1300 795 575 or visit http://www.bankruptcyexpertsipswich.com.au