Bad Credit Home Loans and Bankruptcy
Bankruptcy can be a life-changing and challenging experience, though buying a property with a bad credit home loan doesn’t have to be beyond your reach.
In this article, we look to see if you can get a home loan while bankrupt, if you need to be discharged to qualify, what deposit size you need, and much more.
Read on or click a link to jump ahead:
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[/vc_column_text][vc_row_inner][vc_column_inner width=”1/3″][/vc_column_inner][vc_column_inner width=”1/3″][tek_button button_text=”Get Started” button_link=”url:https%3A%2F%2Fwww.onlinemoneyadvisor.com.au%2Fcontact-us%2F|||” button_position=”button-center”][/vc_column_inner][vc_column_inner width=”1/3″][/vc_column_inner][/vc_row_inner][vc_empty_space][vc_separator color=”purple”][vc_empty_space][/vc_column][/vc_row][vc_row full_width=”stretch_row”][vc_column offset=”vc_hidden-lg vc_hidden-md”][vc_separator color=”purple”][tek_calltoaction cta_icon_type=”no_icon” cta_title=”We’ll match you with your perfect mortgage broker” cta_subtitle=”Save time & money with an expert who specialises in cases like yours.” cta_text_color=”#000000″ cta_button_link=”url:https%3A%2F%2Fwww.onlinemoneyadvisor.com.au%2Fcontact-us%2F|||” cta_button_text=”Get Started”][vc_empty_space height=”50px”][vc_separator color=”purple”][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]Can I get a home loan after bankruptcy?
Yes, you could get a home loan after a bankruptcy, though it will need to have been discharged. You can automatically get discharged three years and a day after it was issued, though the full term of bankruptcy can last five years or longer. During this window, your chances of getting a home loan could increase over time.
If you have other credit issues as well as bankruptcy, this could complicate matters, though it doesn’t mean that a mortgage is off the cards. A broker who specialises in bad credit can review your circumstances and advise your next steps.
Can I get a home loan with a discharged bankruptcy?
Yes, you may be able to. You can get discharged from your bankruptcy three years and one day after the bankrupt’s statement of affairs is accepted by a court. Getting released from bankruptcy is a significant step to getting a home loan, though you may want to consider using this time to rebuild your credit before applying for a home loan.
If you do apply for a home loan with bad credit, the rates of interest and the amount of deposit you need will likely be higher compared to a ‘standard’ application.
There are three main types of ex-bankruptcy home loans that you may be suitable for:
- Low doc loan:
You don’t need as much documentation to apply for this loan, which could make it a better option for someone with a discharged bankruptcy. You’ll likely only need proof of your income, though expect to pay a higher rate of interest. - Basic home loan:
You may need to get pre-approved to qualify for this mortgage, though you may be able to choose between a fixed rate or an interest-only mortgage. For the latter, you will need to tell the lender how you plan to pay back the loan amount at the end of the loan term. - Package home loan:
With this loan, you can combine your home loan with other financial products, such as credit cards, personal loans, and insurance. If you plan on having further credit, this option could save you money, as you’ll only pay a single fee instead of multiple ones.
For more information, speak with a specialist broker. They could find reputable lenders willing to accept bad credit clients. An independent broker can find deals from a wide range of lenders to ensure that you get the best deal possible. Get in touch to speak with a broker for a free, no-obligation chat about your options.
How soon can I secure a mortgage after getting a bankruptcy?
You won’t be able to get a loan straight after filing for bankruptcy, and it can be difficult if you were only recently discharged. Depending on the lender, the nature of your bankruptcy, the size of your deposit and your other personal circumstances, you could take out a mortgage with most lenders anywhere between one to four years after being discharged.
During this period, you can start rebuilding your credit rating. To do this, you can:
- Get a copy of your credit report from Equifax.
With this report, you’ll get a clearer understanding of your finances, from your credit score and your lending history to the negative factors that need to be improved. - Challenge any incorrections.
Once you have your report, note down any inaccuracies or incorrections and inform the credit provider. It may take a little while for these to be corrected, however, it will put you in a better position later down the line when you’re ready to apply for a home loan. - Avoid making multiple credit applications.
Applying for multiple lines of credit won’t help your situation and it could only damage your rating further. - Consider a credit rebuilder card.
You may qualify for a low limit card, which you can use to purchase smaller items and then repay them regularly. This lower limit means less risk to the lender, but if you repay on time and don’t go into the red, your credit limit could increase, and your credit score could improve.
For the best advice on how to get a home loan after bankruptcy, speak with an expert. The brokers we work with can review your circumstances to see what sort of mortgage you could get, as well as advise your next best course of action.
What interest rates will I be eligible for?
You’ll most likely pay a higher rate of interest compared to someone with cleaner credit. This is because lenders will see your application as high-risk since your borrowing history is not ideal, but that doesn’t mean that you can’t unlock competitive rates for your circumstances.
The longer you’ve been discharged, the more likely a lender will offer you a better rate of interest and a higher loan-to-value ratio (LTV).
What about the deposit size?
For a discharged bankruptcy, it’s not uncommon for a lender to request that you have a 20% deposit or more, leaving you with a loan worth 80% of the property’s value. Discharged bankruptcy applications are still high-risk, so many lenders require a larger deposit to offset this risk.
However, depending on your circumstances, it’s not impossible to get a home loan with a smaller deposit – some lenders may offer a 95% LTV mortgage. Get in touch and speak with one of the experts we work with to see if this could be an option for you.
Can a first-time buyer with bankruptcy get a home loan?
Yes, first-time buyers could still be accepted for an ex bankruptcy home loan. You may be able to apply for a first-time buyer grant, depending on your state. Your state revenue office will have more information about grants for first-time buyers, as well as information about whether you’re eligible for duty exemption and concession.
However, a qualified broker can find this information on your behalf and tell you your next steps, as well as find highly tailored mortgage deals. Get in touch to find out more.
Speak to a bad credit home loan broker
For many, bankruptcy can feel like the breaks have been put on your life, but it’s also a slate wiped clean of debt and a fresh start. It also doesn’t mean that you can’t get an affordable home loan.
The specialist advisors we work with have experience helping bad credit customers secure great home loans, and they are waiting to help you. Get in touch for a free, no-obligation chat about your home loan.
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