Getting a Home Loan after Bankruptcy

If you filed for bankruptcy, because, you were advised to do so by a business person such as a solicitor, you may have realised that getting a home loan after bankruptcy can be difficult:

  • Bankruptcy can stay on your credit file for up to 5 years; and
  • Bankruptcy can come back to haunt you when you are trying to get a home loan or refinance your existing loan from one of the major banks.

But, do not worry if you are a discharged bankrupt looking for a home loan or considering refinancing an existing loan, you can still get loan approval.

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

  • A higher interest rates compared to regular home loans
  • A risk fee that may be charged on top of the application fee.

What to consider as a Discharge Bankrupt when applying for a Home Loan after Bankruptcy?

If you are a discharged bankrupt, here is a list of things you should keep in mind, which the specialist lenders may require and more importantly can help you get a home loan after bankruptcy or a refinance loan:

  • They may require you to provide a sound and transparent explanation regarding the situation that led you into bankruptcy (e.g. critical illness, financial difficulty, etc.);
  • They may require you to provide evidence as part of your home loan or refinance application process, to indicate that this bankruptcy was a one-off situation, and that it was well beyond your means to avoid; and
  • They may require you to provide evidence to substantiate that all your financial affairs are now conducted in an excellent manner (e.g. if you are paying rent, are you able to produce a rental ledger to show that your rental payments are being paid on time).

It can also benefit your loan application process. If you can demonstrate to the “specialist lender” that you have a minimum of unsecured liabilities as is possible.

What types of Home loans are available to Discharged Bankrupts?

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

  • Basic Home Loans: These are standard home loans that are often considered a no-frills loan. They usually don’t offer additional extras or flexibility in paying off extra on the loan or varying your repayments
  • Low Doc Loans: These are low documentation home loans for people who are unable to supply required proof of income, such as recent tax returns or other financial documentation at the time of the application. They are usually ideal for self-employed individuals or contractors.

Truly, when your credit has been damaged following a bankruptcy, you have to be more cautious when it comes to your finances. You should take help of a professionally qualified finance broker, who has a thorough knowledge of the credit policies and standard requirements provided by the “specialist lenders”.