Is it possible for you to get a mortgage after going through bankruptcy? Yes.
While bankruptcy is considered a high-risk status among lenders and borrowers, this doesn’t mean you can’t get a loan or mortgage anymore. You just need to search for the right mortgage offers from reputable lenders. You also have to review their terms and all associated fees to get a fair mortgage offer.
People who just finished bankruptcy will go through another tedious process when they apply for a mortgage. The two opposite situations also have opposite financial needs.
The person now needs to qualify financially before the application is approved. There is money available instead, but it is a controlled process to fund a house and its options. It’s a sudden 180-degree in status.
Often, discharged bankrupts will have a harder time getting fast approval for a mortgage loan. The process would also involve some limitations and extra steps. Here’s a closer look into how the application works.
Applying for a Mortgage on a Discharged Bankrupt Status
In Australia, you become a “discharged bankrupt“ after three years and one day of your declaration of bankruptcy date. Despite all odds and extra concerns, you can still get the mortgage. All it takes is adjusting to different steps and working with what options will be available.
You change status from your bankruptcy either through a discharge or an annulment in Australian law. Once you’re done with this status change, you no longer fall under any of the conditions stated in section 149 of the Bankruptcy Act 1966. You will also continue to finish any remaining obligations involved in your bankruptcy.
Your bankruptcy status is also recorded on your credit report for up to seven years. You will be on the same level as mortgage applicants with bad credit or low credit scores, meaning you will be considered a high-risk applicant. You will apply for a mortgage with similar limitations and additional terms and fees just like other high-risk clients.
How it Works
Since you were previously bankrupt, the application process will be different from regular mortgage companies. For one, not all lenders offer these types of loans for higher-risk clients. You need to get a list of lenders who accept loan applicants from discharged bankrupts. People who went bankrupt, have bad credit or have some history of delayed or missed payments are among those who will have adjusted mortgage terms.
While there are indeed lending companies who offer mortgages for high-risk applicants, it will involve additional terms to secure these mortgages. You will have additional application fees, processing fees, and even monthly or periodic fees. Another consideration is the higher interest rate so make sure to ask for all the details when making your choice of mortgage providers.
The Application Process
Experts advise you to look for reasonable lenders who can accept your application as a discharged bankrupt. You have to list down each lender with their terms and conditions, the fees involved, the interest rates, and any other stipulations or conditions they impose during your mortgage.
The challenge here is to find a suitable lender that will accept your application. And take note, every time an application is denied, it affects your credit history. Additional assistance and advice from financial experts or mortgage brokers may help you find the best options without taking a negative hit on your credit score and history. Experts can also provide you with the best options in terms of fees and mortgage conditions.
The most difficult part of the process is finding the right mortgage company for you. Once the loan is accepted, you just have to fulfill the mortgage arrangement rules and make on-time payments.
Some Reminders
High-risk applicants can increase their chances of getting the right mortgage by improving their status first. There are ways to improve your status by improving your credit score, saving up for a substantial deposit, and making on-time payments on all your bills. If you’ve just finished a previous loan successfully, this can also increase your credit score.
Maximising all the possible steps to improve your credit and being financially prepared will also get you better mortgage deals.
Being prepared and getting the right lender and mortgage offer requires extra time and effort. But this will also give you a more realistic and doable mortgage run that matches your financial capability and the agreed loan term length. It will also avoid any potential debts and unsuccessful mortgages when all the terms are favourable for both you and your mortgage provider.
What to Look For in a Mortgage Company
When you are a discharged bankrupt, you fall under the same category as bad credit applicants. You need to narrow down your lender choices to those who accept these kinds of applications.
For example, mortgage brokers such as Savvy are open to bad credit and can provide guidance. Another mortgage company, Pepper Money, specialises in bad credit loans. They can talk to you about your options and figure out the best one that suits your situation. Redrock group is another loan specialist with experience in bad credit loans.
Choosing to go with mortgage lenders who have experience and expertise with high-risk clients can help you streamline the process. You also avoid rejections which can cause delays and wasted efforts. When putting up a list of mortgage lending options, you can narrow down the list to the ones most likely to accept your application without any hassles.
On the other hand, there are also mortgage companies who can create custom loan solutions for high-risk applications. Liberty is one of these companies who offer uncommon solutions that don’t fit the regular options available from most mainstream banks and lenders. The key here is to find these types of lenders and their offers specifically designed for the applicant’s financial capabilities. These features set them apart from other normal lending entities.
Lender companies who provide you with upfront information and are open to a one-on-one initial consultation are most favourable. Not all types of bad credit or discharged bankrupt related mortgages are the same. A company that specifies these details and presents you with suitable mortgage options can help you avoid future issues. This also increases the chances of an approval since you and the lender are on the same page. As mentioned, you might take negative hits on your credit score everytime you do an inquiry on your credit worthiness.
