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; and
>> 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 bankrupt and looking for a home loan or considering refinancing an existing loan, you can still get approved for the loan.
Fortunately, there are now a range of “specialty lenders” that 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 home loans;
>> A higher deposit percentage (meaning, instead of the typical 20 percent, you may need more); and
>> A commission that may be charged in addition to interest rates.
What to consider as Discharge Break when applying for a Housing Loan or a Refinancing Loan?
If you are bankrupt, here is a list of things to keep in mind that specialist lenders may require and, most importantly, can help you get a post-bankruptcy home loan or refinance loan:
>> You may be asked to provide a solid and transparent explanation of the situation that led to your bankruptcy (eg critical illness, financial hardship, etc.);
>> You may be required to provide evidence as part of your home loan or refinance application process to indicate that this bankruptcy was a unique situation and beyond your ability to avoid it; and
>> You may be asked to provide proof that all of your financial affairs are now running great (for example, if you are paying rent, can you produce a rent book to show that your rent payments are being made?) 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 bankrupts?
This will depend on the “specialist lender” you choose. Here is a list of loans that you can consider:
Basic Home Loans: These are standard home loans that are often considered straight-forward loans. They generally do not offer added extras or flexibility to pay more of the loan or vary your payments.
Low Document Loans: These are low documentation loans for people who cannot provide 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 credit policies and standard requirements provided by “specialist lenders.”