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How To Get A Home Loan After Being Discharged Bankrupt

young man happy about rebuilding his life after bankruptcyIf you’re one of 4,400 Australians currently bankrupt or on a Part 9 agreement (Australian Financial Security Authority), you may be wondering when you can start being treated fairly again by the banks and move on with your life.

Even after you’re discharged, a record of the bankruptcy will remain on your credit file for up to 5 or even 7 years and you’ll have a permanent record listed on the National Personal Insolvency Index (NPII).

This can automatically rule you out of getting approved for a home loan with a major bank in Australia. Game over right?

Not necessarily. Here’s four tips for getting approved for a home loan if you’re discharged bankrupt.

Stop applying for credit

If you’ve just been discharged from bankruptcy, the last thing you want to do is to apply for unsecured debt such as a personal loan or credit card.

Even if you get approved, just making an enquiry will be recorded on your credit file and show to the bank that you haven’t really learned from your past mistakes.

You’re digging yourself a hole just after being discharged from bankruptcy!

Don’t apply with multiple lenders at the same time

Don’t apply with multiple lenders at the same time because you don’t know which one will approve your loan. You’ll add unnecessary enquiries to your credit file.

Also, lenders will know you’ve declared bankruptcy because it’s on your credit file, so if you’re trying to hide it from them, you’re kidding yourself.

You’re actually better off being upfront with the lender so at least then you’ll know where you stand before you even start the application process. and maybe avoid an unnecessary enquiry on your credit file.

Save, save, save

Even if you’re still bankrupt, start saving as much as you can – build that savings history!

Generally, you’ll need around 14-16% of the purchase price as a deposit to qualify for a home loan with a specialist or non conforming lender but simply saving money is evidence to the lender that you’re moving in the right direction to becoming a credit-worthy borrower.

Even if you are being gifted a deposit it still helps to show good character and that you have the ability to save, therefore, make your mortgage repayments.

See a specialist

There are actually a few lenders out there that specialise in lending to people who are discharged bankrupt but some of them are dodgy and wouldn’t think twice about offering you not only an unreasonable interest rate but approve you for a loan that isn’t right for your situation.

You’ll want to seek out specialist lenders with a good reputation and a strong track record but how do you know who these lenders are?

A specialist mortgage broker can help. You can avoid getting declined by a bank that doesn’t deal with customers who are discharged bankrupt.

A broker will properly assess your situation and help you to build a strong case with the right lender and product for your situation.

Some of the lenders on our panel may consider your case even after one day of being discharged from bankruptcy.

The great thing is that once you’re approved, you can use it as a stepping stone back to a major bank.

Once the bankruptcy is clear from credit file and you’ve made been paying off your mortgage without missing any repayments during that time, you can ask your broker about refinancing to a prime lender.

Are you discharged bankrupt?

Call us on 1300 889 743 or complete our free assessment form to find out how we can help you.