What Happens When You Declare Bankruptcy and Buying A Home
Although bankruptcy has a lot of financial consequences, it surely doesn’t mean the end of the world. Lots of individuals file for bankruptcy for numerous reasons, and this figure only grows with the harsh economic conditions that we encounter today. According to data from the Australian Financial Security Authority (AFSA), there were 7,466 episodes of bankruptcy in Australia in the September 2014 quarter alone. Getting bankruptcy advice is imperative so you become mindful of exactly what happens financially when you declare bankruptcy.
There are two categories of bankruptcy: undischarged bankruptcy and discharged bankruptcy. Undischarged bankruptcy implies that you are still in the process of bankruptcy and are not able to secure any kind of loan. Discharged bankruptcy means that you are no longer bankrupt, and can acquire a loan with different specialist lenders. Bankruptcy normally lasts for three years but can be lengthened in some scenarios.
Sadly, the banks do not specify the reasons for your bankruptcy and this can make it quite difficult to get a home loan approved once you are ultimately discharged. Whether you will be capable to buy a home after bankruptcy relies on various factors, like the kind of loan you’re after and how you deal with your credit rating once declared bankrupt. What is clear is that your spending capacity will be reduced, 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 borrowers that have been discharged from bankruptcy for as little as one day. Though most of these loans feature a higher interest rate and fees, they are nevertheless an option for those that are serious. Most of the time, a bigger deposit is needed and there are more stringent terms and conditions when compared to normal home loans.
There are plenty of differences among lenders for discharged bankruptcy loan approvals. A couple of lenders will even supply discounted rates to those people whose finances are in good shape and who have good rental history, if relevant. The amount of time between your discharge and loan application will similarly impact the end result of your application. Two years is typically advised. Additionally, sustaining a consistent income and employment are also variables which will be taken into consideration. Most bankrupt individuals will also actively attempt to improve their credit rating quickly to decrease the strain of bankruptcy once discharged.
Points to consider when applying for a home loan once discharged.
Choosing a suitable lender is crucial, so it’s a good idea to select a lender that not only provides loans to discharged bankrupts but one that is well-known and trustworthy. By doing this, you will feel comfortable that you are getting fair terms and conditions and your application is more likely to be approved. There are a number of unreliable lenders on the market that take advantage of the financially vulnerable, so please take care. Another significant variable to consider is that you should not apply to more than one lender simultaneously. Every loan application surfaces on your credit history, and multiple applications at the same time are viewed negatively by lenders.
Pros and cons of home loans for discharged bankrupts
You can still a loan. Even though it may be challenging, 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 are financially responsible.
Your credit rating will improve. Straightforward tasks such as paying your bills on time and producing steady income will improve your credit rating.
You can’t acquire a loan until you are discharged. Most lenders will not approve any loans to individuals that are undischarged to avoid endangering any additional financial hardship.
Increased rates and fees. Usually, interest rates and fees will be increased 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 be on the National Personal Insolvency Index (NPII).
Bankruptcy is never a pleasurable experience, but it does not indicate that you’ll never own a home again. Because of the intricacy of bankruptcy, it’s vital to seek professional advice from the experts to make certain you understand the process and therefore make prudent financial decisions. For more details or to speak to someone about your situation, contact Bankruptcy Experts Tablelands on 1300 795 575 or visit http://www.bankruptcyexpertstablelands.com.au