Discharged bankrupt? You don’t have to wait 7 years to get a home loan

If you filed for bankruptcy because a business person, such as a lawyer, advised you to do so, you may have realized that:

>> Bankruptcy can stay on your credit file for up to 7 years; Y

>> Bankruptcy can come back to haunt you when you’re trying to get a home loan or refinance your existing loan from one of the major banks.

But don’t worry if you’re broke and looking for a home loan or considering refinancing an existing loan, you can still get loan approval.

Fortunately, there are now a range of “specialty lenders” who cater specifically to this “niche” and are willing to offer home loans or refinance existing loans to people with discharged bankruptcy. Although these loans can come with:

>> A higher interest rate compared to regular mortgage loans;

>> A higher deposit percentage (ie instead of the typical 20 percent, you may need more); Y

>> A fee that may be charged in addition to interest rates.

What to consider as a Discharge Bankruptcy when applying for a Home Loan or a Refinance Loan?

If you’re bankrupt, here’s a list of things to keep in mind that specialist lenders may require and, more importantly, can help you get a post-bankruptcy home loan or refinance loan:

>> You may be asked to provide a strong and transparent explanation of the situation that led to your bankruptcy (eg critical illness, financial hardship, etc.);

>> You may be asked to provide evidence as part of your home loan or refinance application process, to indicate that this bankruptcy was a unique situation and was beyond your ability to avoid; Y

>> You may be asked to provide evidence to substantiate that all of your financial affairs are now being conducted in an excellent manner (for example, if you are paying rent, can you produce a rent book to show that your rent payments are are they paying on time?

It can also benefit your loan application process. If you can show the “specialist lender” that you have as few unsecured liabilities as possible.

What types of home loans are available to discharged bankrupt individuals?

This will depend on the “specialist lender” you choose. Here is a list of loans you can consider:

Basic home loans: These are standard mortgage loans that are often considered simple loans. They generally don’t offer extra frills or flexibility to pay more on the loan or vary your payments.

Low Document Loans: These are loans with little documentation for people who cannot provide the required proof of income, such as recent tax returns or other financial documentation at the time of application. They are usually ideal for freelancers or contractors.

In truth, when your credit has been damaged after a bankruptcy, you need to be more cautious when it comes to your finances. You should seek the help of a professionally qualified financial broker who has a thorough understanding of the credit policies and standard requirements provided by “specialist lenders.”