When can you apply for a home loan after bankruptcy?
- Discharged bankrupt: You can borrow up to 90% of the purchase price of a property but you’ll need 14% to 16% of the purchase price to cover your deposit, stamp duty and Lenders Mortgage Insurance (LMI).
- Undischarged bankrupt: We can’t assist you with a home loan if you’re currently bankrupt but a specialist financier may be able to assist you.
Please fill in our online assessment form or give us a call on 1300 889 743 and one of our mortgage brokers can let you know what your options are.
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.
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 to discuss your situation.
Are low doc loans available?
Yes, it’s possible for discharged bankrupts 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 6 to 12 months repayments have been on time.
What is discharged bankruptcy?
The term ‘discharged’ is purely an automatic process of the law which releases the bankrupt from bankruptcy.
What does this mean in plain English?
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.
Save yourself the hassle of approaching the major banks.
You will find that they cannot approve your home loan application while the bankruptcy listing is still on your credit file.
How long does the bankruptcy stay on my credit file?
A record of the bankruptcy will remain on your credit file for up to 5 or even 7 years even after you are discharged.
You will also have a permanent record listed on the National Personal Insolvency Index (NPII).
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 borrowers who are discharged bankrupt.
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 specialist in bad credit
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.