What Happens When You Declare Bankruptcy and Purchasing A Home
Even though bankruptcy has many financial impacts, it certainly does not suggest the end of the world. Lots of individuals file for bankruptcy for plenty of reasons, and this number only grows with the tough economic conditions that we encounter 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. Finding bankruptcy advice is imperative so you become informed of exactly what transpires financially when you declare bankruptcy.
There are two categories of bankruptcy: undischarged bankruptcy and discharged bankruptcy. Undischarged bankruptcy implies that you’re still in the process of bankruptcy and are unable to acquire any kind of loan. Discharged bankruptcy means that you are no longer bankrupt, and can acquire a loan with numerous specialist lenders. Bankruptcy usually lasts for three years however can be extended in some scenarios.
Unfortunately, the banks do not list the reasons for your bankruptcy and this can make it considerably challenging to get a home loan approved when you’re eventually discharged. Whether you will have the ability to buy a home after bankruptcy hinges on several factors, including the type of loan you’re seeking and how you take care of your credit rating once declared bankrupt. What’s certain is that your spending ability will be limited, and repossession of property is common.
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 only one day. Although many of these loans feature a higher interest rate and charges, they are nonetheless an option for individuals that are interested. Most of the time, a larger deposit is required and there are stricter terms and conditions when compared to normal home loans.
There are many differences between lenders for discharged bankruptcy loan approvals. A few lenders will even offer discounted rates to those people whose finances are in good shape and who have excellent rental history, if relevant. The period of time between your discharge and loan application will equally affect the result of your application. Two years is generally advised. Equally, sustaining a regular income and employment are likewise components which will be considered. Most bankrupt people will also make an effort to attempt to bolster their credit rating immediately to reduce the hardship of bankruptcy once discharged.
Points to consider when applying for a home loan once discharged.
Choosing an appropriate lender is important, so it’s a smart idea to choose a lender that not only offers loans to discharged bankrupts but one that is recognised and respectable. By doing this, you’ll feel comfortable that you are securing decent terms and conditions and your application is more likely to be approved. There are some unreliable lenders on the market that take advantage of the financially vulnerable, so please be careful. Another significant aspect 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. Though it may be complicated, 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. Basic tasks such as paying your bills on time and generating steady income will improve your credit rating.
You can’t receive a loan until you are discharged. Many lenders will not approve any loans to people that are undischarged to avoid risking any further financial distress.
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 be on the National Personal Insolvency Index (NPII).
Bankruptcy is never a pleasant experience, but it does not mean that you’ll never own a home again. Because of the complexity of bankruptcy, it’s imperative to seek professional advice from the experts to make sure you understand the process and therefore make prudent financial decisions. For more details or to talk to someone about your circumstances, contact Bankruptcy Experts Wollongong on 1300 795 575 or visit http://www.bankruptcyexpertswollongong.com.au