Getting a home loan after bankruptcy in Australia to 95% LVR

Having a bad credit history such as being a discharged Bankrupt or Part 9 when applying for a home loan doesn’t always disqualify you for a mortgage. What it does mean is that the borrower will require a Non-conforming lender which may incure higher interest rates and costs. When someone files for bankruptcy, he or she is identified as an ‘undischarged bankrupt’, which confirms they are still within the process of insolvency, a period that typically lasts for a minimum of three years, depending on the circumstances. During this bankruptcy period, they’re only allowed to possess limited assets, cannot travel abroad and can’t apply for credit unless it is to pay out the trustee.

The Australian Financial Security Authority (AFSA) will nominate a trustee that may look over the individual’s financial affairs until this bankruptcy period ends or until the trustee deems the person capable of handling their own money. At that time they’re released from Bankruptcy and are now referred to as a ‘discharged bankrupt’, which lifts the restrictions on your finances.

Bankruptcy and Part 9 are recorded on your credit report for seven years from listing and you’ll even be permanently listed on the National Personal Insolvency Index (NPII). Most Prime bank lenders and non bank lenders will require a completely clean credit file before they will approve a home loan.

What are my options if discharged from Bankruptcy or Part 9?

There are specialists lenders such as Non Conforming Loans that will lend to Discharged Bankrupts and Part 9 applicants to a maximum lvr of 95% in high population areas.

Discharged bankrupts are seen as a high risk, so lenders will generally charge higher interest rate and fees compared to a prime loan and will only lend in high population areas. Once your credit file is clear and you have maintained good conduct with your non conforming lender you will be able to refinance to a prime loan.

If you’ve got been declined for a home loan due to bad credit you simply haven’t found the correct lender suitable for your circumstances.