April 20, 2017 0

What Happens When You Declare Bankruptcy and Buying A Home

Posted by:Charles Bosse onApril 20, 2017

Declaring Bankruptcy,Bankruptcy Sydney, Bankruptcy Advice

Even though bankruptcy has various financial impacts, it surely doesn’t represent the end of the world. Many folks file for bankruptcy for numerous reasons, and this amount only increases with the challenging economic conditions that we see today. According to statistics 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 necessary so you become aware of exactly what happens financially when you declare bankruptcy.

There are two types 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 indicates that you are no longer bankrupt, and can secure a loan with numerous specialist lenders. Bankruptcy generally lasts for three years however can be extended 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 eventually discharged. Whether you will have the ability to buy a home after bankruptcy rests on several factors, including the type of loan you’re after and how you control your credit rating once declared bankrupt. What is clear is that your spending capacity will be reduced, and repossession of property is common.

Can you get a home loan approved after bankruptcy?

There are a range of specialist lenders providing home loans to customers that have been discharged from bankruptcy for as little as one day. Though the majority of these loans come with a higher interest rate and fees, they are nevertheless an option for those that are interested. Most of the time, a bigger deposit is needed and there are stricter terms and conditions to normal home loans.

There are plenty of differences among lenders for discharged bankruptcy loan approvals. A couple of lenders will even offer reduced rates to those individuals whose finances are in good condition and who have good rental history, if applicable. The period of time between your discharge and loan application will equally affect the result of your application. Two years is generally recommended. Additionally, sustaining a stable income and employment are also variables which will be taken into account. Most bankrupt people will also proactively attempt to strengthen their credit rating immediately to minimise the hardship of bankruptcy once discharged.

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

Selecting a suitable lender is crucial, so it’s a good idea to go with a lender that not only grants loans to discharged bankrupts but one that is well-known and credible. By doing this, you’ll feel comfortable that you’re receiving reasonable terms and conditions and your application is more likely to be approved. There are several dubious lenders on the market that take advantage of the financially vulnerable, so please take care. Another key aspect to consider is that you should not apply to more than one lender at a time. Every loan application surfaces on your credit history, and several applications at the same time are viewed negatively by lenders.

Pros and cons of home loans for discharged bankrupts

Pros

You can still a loan. Although 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 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 producing 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 jeopardizing any further financial hardship.

Increased rates and fees. In general, interest rates and fees will be increased for discharged bankruptcy loans. You can only obtain 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 indicate that you will never own a home again. As a result of the intricacy of bankruptcy, it’s imperative to seek professional advice from the experts to ensure you understand the process and therefore make sensible financial decisions. To learn more or to talk with someone about your scenario, contact Fresh Start Solutions Sydney on 1300 818 575 or visit http://freshstartsolutions.com.au/bankruptcy-sydney

 

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