Home Loans After Bankruptcy

What Is Discharged Bankruptcy?

When you are discharged from bankruptcy, it means that you’re no longer bankrupt. Any restrictions that were in place during the bankruptcy term, such as not being able to travel overseas or limits on the amount of assets you can own, no longer apply.

Despite being discharged, you are still obligated to cooperate with the trustee, who will continue to manage your bankruptcy for a set period of time.

From a finance point of view, it means that you are now able to apply for credit again. However, your credit file and the bankruptcy register will continue to show that you were bankrupt in the past.

When Can You Apply for A Home Loan After Bankruptcy?

You can apply for a home loan immediately after discharge through some specialist or non-bank lenders. Most major banks generally require at least two years since discharge, along with a clean repayment history and stable income, before they will consider approving your application.

Typical lender timeframes

Common strategy

1. Start with a specialist lender

2. Maintain 12–24 months of perfect repayments

3. Refinance to a major lender for a lower rate

Which Lenders Can Help You After You’re Discharged From Bankruptcy?

Will I Pay A Higher Interest Rate After Bankruptcy?

In most cases, yes. Lenders price loans based on risk, and a recent bankruptcy increases perceived risk.

However, we’ve made an agreement with some of our lenders to obtain normal home loan interest rates for customers who are now in a good financial position.

Discounted rates may be available if:

• Your loan is for no more than 80% of the property value.
• You can provide evidence that you now pay your bills on time, e.g. a rental history.
• You can provide evidence that the bankruptcy was a one-off event that wasn’t your fault.
• You’ve been discharged for a particular period of time, e.g. one year or more.

We recommend that you don’t approach the major banks for a loan as they won’t approve your application while the bankruptcy listing is still on your credit file.

We can’t guarantee that we can get you normal bank interest rates. Every application is assessed on its merits. Please call us on 1300 889 743 or fill in our online enquiry form to discuss your situation.

Are Low Doc Home Loans Available After Discharge?

Yes, it’s possible for discharged bankrupts who are self-employed to qualify for a low doc loan.

You must meet standard low doc criteria; provide limited income evidence in the form of BAS, an accountants letter or business bank statements and have a reasonable explanation for your past credit history.

Can I Get A Guarantor Home Loan After Bankruptcy?

Yes, you can still get a home loan even after bankruptcy. Specialist lenders understand your situation and offer loans up to 90% of the property’s purchase price.

However, there are important things to consider:

• You might need a deposit of around 14 -16% of the home’s value, plus extra costs like stamp duty and insurance.
• Your income and debts are crucial factors. Lenders use them to decide if you can afford the loan. By planning carefully and managing your finances well, you can boost your chances of approval.

Keep in mind that some lenders won’t accept a parent’s guarantee for 100% lending. In such cases, options include your parents funding a 15% deposit and fees from their property and giving it to you as a gift.

Can I Refinance A Home Loan After Bankruptcy?

Yes, refinancing is possible if you have demonstrated consistent, on-time repayments, typically for at least six months. Many borrowers refinance after 12–24 months to move from a specialist lender to a major bank and reduce their interest rate.

What lenders usually assess:

• Last six months repayment history
• Income stability
• Loan-to-value ratio
• No new defaults or arrears

Speak with one of our specialist mortgage brokers to go over your refinancing options. Call us on 1300 889 743 or fill in our online assessment form.

How Long Does The Bankruptcy Stay On My Credit File?

A record of the bankruptcy will remain on your credit file for:

• 5 years from the date you became bankrupt or
• 2 years from when your bankruptcy ends, whichever is later.

You will also have a permanent record listed on the National Personal Insolvency Index (NPII).

All lenders will check your credit file with either Equifax or Experian. However, not all lenders check the NPII. Either way, most lenders require you to inform them if you have declared bankrupt in the past.

The lenders you owed money to when you went bankrupt will never forget what has happened and are unlikely to lend to you ever again.

How Can I Rebuild Credit After Bankruptcy?

If you’ve gone through bankruptcy, you may need to take extra steps to show lenders that you can manage credit responsibly.

Pay your bills on time

Make sure that you pay all of your bills, utilities and rent on time.

If you end up with another black mark on your credit file then it makes you look like a repeat offender.

Most importantly, avoid applying for new credit where possible, particularly unsecured debt and personal loans.

Every credit enquiry you make is recorded on your credit file.

Generally speaking, any more than two enquiries over six months can break your application.

Avoid applying with a lender directly

Each lender has very different lending policies when it comes to considering mortgages for discharged bankrupts.

By applying with banks at random, you risk being declined.

The more lenders you apply with, the more unnecessary enquiries you add to your credit file, further reducing your chances at approval.

You can also forget the idea of trying to hide your financial history from the lender because your credit file is accessible to all credit providers.

A better option is to be upfront with the lender before you start the application process.

Build your savings

Start building your genuine savings by making regular deposits into a savings account.

This proves to the banks that you are now in a better financial position and, for all intents and purposes, in a position to make regular home loan repayments.

Once approved, make your repayments on time

Don’t even be a day late, particularly since the introduction of positive credit reporting and the focus on repayment history.

The reason is that it is hard for us to refinance your home loan back to a major bank at a cheaper interest rate if your repayment history isn’t perfect.

The goal is to show that the problems that happened are in the past and that you are now a credit-worthy borrower.

Speak With A Bad Credit Specialist

Our mortgage brokers are credit experts who understand the challenges faced by borrowers who are discharged bankrupt.

Call us on 1300 889 743 or complete our online enquiry form and we can apply with a lender that will consider your situation.