What is discharged bankruptcy?
When you are discharged from bankruptcy, you are no longer bankrupt and no longer required to have limited assets and are able to travel overseas.
However, the bankrupt estate continues and the now ex-bankrupt still has an obligation to cooperate with the trustee.
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 as early as the day after you’ve been discharged from bankruptcy via some of our specialist lenders.
Most of the major lenders require you to have been discharged from bankruptcy for at least two years with no missed repayments before they will consider your application.
So, a good plan is to refinance from the specialist lender to a major lender once two or more years have passed.
Will I get a discounted interest rate?
In most cases, you’ll pay a higher interest rate for your loan.
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 loans available?
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 refinance my current home loan?
Most people lose their properties when they declare themselves bankrupt.
A few people manage to keep their homes or have purchased a home since being discharged.
You can refinance to a new lender if you have an excellent repayment history on your current home loan.
Lenders ask for statements to prove that your last six months repayments have been on time.
In many cases, your first mortgage is at a higher rate with a specialist lender and then later, we refinance your loan to a low rate with a major lender once you have a proven repayment history.
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 Illion (formerly Dun & Bradstreet). 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.
Rebuilding a positive credit history
People that are ex-bankrupt may need to undertake some additional steps to “prove themselves” as good borrowers.
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.