What Happens When You Declare Bankruptcy and Buying A Home

While bankruptcy has a lot of financial repercussions, it surely does not signify the end of the world. Many people file for bankruptcy for many reasons, and this amount only escalates with the tough economic conditions that we experience today. According to data 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 informed 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’re still in the process of bankruptcy and are unable to acquire any type of loan. Discharged bankruptcy means that you are no longer bankrupt, and can obtain a loan with numerous specialist lenders. Bankruptcy normally lasts for three years however can be lengthened in some scenarios.

 

Sadly, the banks don’t provide the reasons for your bankruptcy and this can make it quite difficult to get a home loan approved when you’re ultimately discharged. Whether you’ll have the capacity to buy a home after bankruptcy hinges on a range of factors, such as the type of loan you’re seeking and how you handle your credit rating once declared bankrupt. What is definite is that your spending capability 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 clients that have been discharged from bankruptcy for as little as one day. Though most of these loans come with a higher interest rate and charges, they are nevertheless an option for people that are interested. In many cases, a larger deposit is needed and there are stricter terms and conditions to normal home loans.

 

There are lots of differences amongst lenders for discharged bankruptcy loan approvals. A few lenders will even provide reduced interest rates to people whose finances are in good condition and who have excellent rental history, if applicable. The length of time between your discharge and loan application will likewise impact the outcome of your application. Two years is generally advised. Additionally, sustaining a stable income and employment are also variables which will be taken into consideration. A lot of bankrupt people will also actively try to bolster their credit rating immediately to reduce the difficulty of bankruptcy once discharged.

 

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

 

Picking out a suitable lender is important, so it’s a smart idea to choose a lender that not only grants loans to discharged bankrupts but one that is well-known and trustworthy. By doing this, you will feel confident that you’re securing reasonable terms and conditions and your application is more likely to be approved. There are a few untrustworthy lenders on the market that take advantage of the financially vulnerable, so please beware. Another significant variable to think about is that you should not apply to more than one lender simultaneously. Every loan application surfaces on your credit history, and multiple applications all at once 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 conceivable for discharged bankrupts to get a home loan approved.

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

Your credit rating will improve. Straightforward tasks like paying your bills on time and producing steady income will improve your credit rating.

 

Cons

You cannot get a loan until you are discharged. Almost all lenders will not approve any loans to people that are undischarged to prevent risking any additional financial distress.

Increased rates and fees. Normally, interest rates and fees will be increased for discharged bankruptcy loans. You can only get 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 pleasurable experience, but it doesn’t suggest that you’ll never own a home again. Due to the intricacy of bankruptcy, it’s imperative to seek professional advice from the experts to ensure you understand the process and therefore make prudent financial decisions. To find out more or to speak with someone about your situation, contact Bankruptcy Australia on 1300 795 575 or visit http://www.bankruptcy-australia.net.au