April 20, 2017 0

What Happens When You Declare Bankruptcy and Buying A Home

Posted by:Charles Bosse onApril 20, 2017

Whilst bankruptcy has lots of financial consequences, it surely does not suggest the end of the world. Lots of folks file for bankruptcy for many reasons, and this figure only intensifies with the challenging 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. Finding bankruptcy advice is crucial 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’re currently in the process of bankruptcy and are not able to acquire any kind of loan. Discharged bankruptcy means that you are no longer bankrupt, and can obtain a loan with several specialist lenders. Bankruptcy generally lasts for three years however can be lengthened in some circumstances.

 

Unfortunately, the banks do not specify the reasons for your bankruptcy and this can make it considerably difficult to get a home loan approved when you are eventually discharged. Whether you will have the ability to buy a home after bankruptcy depends on several factors, for instance the kind of loan you’re looking for and how you manage your credit rating once declared bankrupt. What is definite is that your spending capability will be confined, and repossession of property is common.

 

Can you get a home loan approved after bankruptcy?

 

There are a number of specialist lenders providing home loans to customers that have been discharged from bankruptcy for only one day. Although most of these loans feature a higher interest rate and fees, they are still an option for individuals that are serious. In most cases, a bigger deposit is needed and there are more stringent terms and conditions to regular home loans.

 

There are lots of differences amongst lenders for discharged bankruptcy loan approvals. A few lenders will even offer discounted rates to people whose finances are in good condition and who have good rental history, if relevant. The period of time between your discharge and loan application will equally affect the end result of your application. Two years is normally advised. Additionally, sustaining a steady income and employment are also variables which will be taken into account. Most bankrupt individuals will also proactively try to bolster their credit rating quickly to minimise the difficulty of bankruptcy once discharged.

 

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

 

Deciding on a suitable lender is crucial, so it’s a good idea to select a lender that not only grants loans to discharged bankrupts but one that is prominent and trustworthy. By doing this, you’ll feel confident that you’re getting reasonable terms and conditions and your application is more likely to be approved. There are some dubious lenders on the market that take advantage of the financially vulnerable, so please be careful. Another key aspect to consider is that you should not apply to more than one lender at a time. Every loan application appears on your credit history, and several applications simultaneously are viewed negatively by lenders.

 

Pros and cons of home loans for discharged bankrupts

 

Pros

You can still a loan. Despite the fact that it may be challenging, it is still feasible for discharged bankrupts to get a home loan approved.

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

Your credit rating will improve. Practical tasks such as paying your bills on time and generating steady income will improve your credit rating.

 

Cons

You can’t acquire a loan until you are discharged. Almost all lenders will not approve any loans to individuals that are undischarged to prevent risking any further financial hardship.

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 be on the National Personal Insolvency Index (NPII).

 

Bankruptcy is never an enjoyable experience, but it does not imply that you’ll never own a home again. Because of the intricacy of bankruptcy, it’s imperative to seek professional advice from the experts to guarantee you understand the process and therefore make sensible financial decisions. For more information or to talk to someone about your circumstances, contact Fresh Start Solutions Brisbane on 1300 818 575 or visit http://freshstartsolutions.com.au/bankruptcy-brisbane

 

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