Home Loans for Ex Bankrupts

by Rae E. Non Conforming Loans

At a time in your life for a whole variety of reasons, we may find ourselves overwhelmed by debt. When that happens bankruptcy can feel like a way out of a stressful position but it can also cause some future financial issues. So what are the rules around getting a home loan after bankruptcy? Here’s what you need to know.

What is Bankruptcy?

Bankruptcy is a legal process that basically means declaring you can’t pay your debts. In that sense Bankruptcy can offer a position of relief, as it releases you from debt.

For the utmost part, bankruptcy offers a fresh start. It’s clearly not a quick fix however. The Australian Financial Security Authority (AFSA), which oversees insolvencies, advises that bankruptcy typically lasts for three years. During this time, strict conditions apply. A trustee will be appointed to manage your finances, and if you earn over a set amount you may need to make payments to the trustee. In addition, you can face restrictions around leaving Australia.

Bankruptcy can also impact your capability to get approved for types of credit, including a home loan.

How will home loan lenders know I ’m Bankrupt?

When you’re declared Bankrupt, your name is listed permanently on the National Personal Insolvency Index (NPII). This is a public register that shows particular details similar as your name, date of birth and address, along with whether you ’re still bankrupt or have been discharged from your bankruptcy. While it’s possible to request that some details similar as your address are hidden from public view if necessary for safety reasons, your name and date of birth will always remain on the NPII, where they can be seen by lenders if they check the register.

Your credit record can also expose details of bankruptcy. Credit reporting agencies keep a record of bankruptcy for five years from the date you are listed as a bankrupt.

Getting a home loan after Bankruptcy

During the course of your bankruptcy, it’s an offence to apply for further debt in most circumstances. This means you clearly won’t be able to apply for a home loan during your bankruptcy period. Once your Bankruptcy (1 day) has ended, there’s no restriction on applying for loans or credit. It’s up to the lender to decide if it’ll approve your loan application.

Buying a house once discharged from bankruptcy

For most of us, buying a home means taking out a home loan, and if you’ve been declared bankrupt your capability to get a home loan can also depend on which lender you choose.

Fortunately there are a many non conforming lenders that are able to offer home loans for discharged bankrupts. These lenders can lend to 95% of purchase price in high population areas.

While a loan from a non conforming lender may cost you more, it can be one option to consider if you’re keen to enjoy your own home. After several years of regularly making loan disbursements it may be possible to refinance your home loan with a traditional lender as long as good conduct is evident.