Discharged Bankruptcy Home Loan
What is discharged bankruptcy?
The term “discharge” is purely an automatic process of the law which releases the bankrupt from the bankruptcy, however the bankrupt estate continues and the now ex-bankrupt still has an obligation to cooperate with the trustee.
Save yourself the hassle of approaching the major banks only to find that they cannot approve your application due to your credit history of being bankrupt.
Can I qualify for a mortgage?
This depends on your situation, and the size of your deposit:
- Undischarged bankrupt: We cannot assist you with a home loan. You may be able to speak to a specialist financier that can assist you, we do not help people who are currently bankrupt to borrow money.
- Discharged bankrupt: We can help you borrow up to 90% of the purchase price of a property by applying with a specialist lender! You must have enough money to pay for stamp duty (if applicable) and Lenders Mortgage Insurance (LMI). In most cases you need 14% to 16% of the property value in cash to cover your deposit & purchasing costs.
***We cannot help you if you do not meet the above criteria OR do not have a deposit***
Our mortgage brokers are experts in home loans for people with impaired credit. Please enquire online or give us a call on 1300 889 743 and one of our mortgage brokers will let you know your options.
Is there an alternative to a discharge from bankruptcy?
Yes, the bankruptcy may be annulled. An annulment is a complete undoing of bankruptcy, as if the bankruptcy never happened. However in saying so, this does not mean that the lenders will not know that you were previously bankrupt. Your credit history will still show the period of your bankruptcy and when this was discharged.
In simple terms, a discharge is the conclusion to the legal status of bankruptcy against the person who is in debt. On the other hand, an annulment cancels the bankruptcy entirely, removing the bankrupt from bankruptcy and ending the bankrupt estate completely.
How long does it take to clear a bankruptcy?
Bankruptcy information is held on your credit file for 7 years, however if the Statement of Affairs is never filed then the bankruptcy will continue; this can sometimes reach over the 7 year term.
It is best to confirm that you have been discharged by bankruptcy prior to enquiring for a home loan. You can seek legal advice to do so or you can simply request for a copy of your credit report from Veda Advantage and it will state the date you were discharged and cleared from bankruptcy.
What if I was bankrupt over seven years ago?
Once the bankruptcy is no longer on your credit file we can help you borrow up to 90% or even 95% of the property value.
A permanent record of your bankruptcy is listed on the National Personal Insolvency Index (NPII) held with the Insolvency & Trustee Service Australia (ITSA), which is part of the Australian Government. Lenders have access to this record and some will check it as part of their credit assessment process.
As part of your application for a mortgage with any lender you are required to declare if you have ever been bankrupt. If you are caught lying on your application then your loan will be declined.
Note that lenders that you have had a problem with in the past are unlikely to ever want to approve a loan for you, no matter how much time has passed.
Are all my debts cleared after being discharged?
Debts that you have are recorded on your credit file and can be cleared once you have been discharged from bankruptcy. However there are some debts which remain on your credit file despite being discharged from bankruptcy, these debts include:
- Court fines
- HECS debts
- Child support payments
- Debts incurred by fraud
- Student loans
You should refer to the terms of your bankruptcy for further details.
Rebuilding a positive credit history
Did you know that as a discharged bankrupt that you can “prove yourself”? You will need to establish a new credit history by opening new accounts and managing them well.
Firstly, make sure that you pay all of your bills & your rent on time, every time. If you end up with a new default or blemish on your credit file then you will be seen as a serial defaulter, and will not qualify for a mortgage.
Do not overdraw your cheque account, do not have any cheques that bounce or direct debits that decline. These are all signs of continuing financial hardship and will make it difficult for you to get approved for a loan.
If you already have a credit card then pay if off in full every month, do not make a single late payment and never exceed the credit limit. This is seen as poor financial management.
Keep your level of unsecured debt at a minimum. If you do apply for a small car loan or personal loan then this is fine, however as a general rule your unsecured debt should not exceed more than 10% of you & your partner’s combined gross incomes.
Genuine savings is the answer!
Australian lenders are well aware that people who can save a deposit are a significantly lower risk than people who cannot save or are living day to day. Open a savings account, make regular contributions each time you are paid and do not withdraw any funds. This proves you are financially stable and have the ability to live within your means.
By building up this savings history it will make it much easier for us to approve a home loan for you. You can read more about this on our genuine savings page.
Contact a mortgage broker
Our mortgage brokers are experts in helping people with impaired credit to apply for a loan. Please read the criteria at the top of this page, and if you qualify for a loan then please call us on 1300 889 743 or enquire online. We’ll contact you to discuss your situation in detail and to let you know if you qualify for a mortgage.