How to Get a 95% Home Loan for a Bankruptcy Discharge
It is a widely held belief, that a discharged bankrupt can only apply for a home loan up to 80% of the value of the property, this is totally incorrect, there are lenders who will lend up to 95% of the value of the property, even if you have only been discharged for as little as one day.
The cost of the LMI waiver fee, which at a 95% borrowing level could be roughly 2% of the funds borrowed, must be covered by your resources. This fee is charged in place of Lenders Mortgage Insurance, which is not available to borrowers who have been declared bankrupt.
Given that there might also be transfer duty to pay, it would be prudent for you to set aside between 9% and 13% of the property’s purchase price.
The ability to switch to a lower rate is possible once 20% equity has been established in the property, subject to being discharged for more than two years. Interest rates are an important factor, they are most definitely not as low as those for people who do not have credit history problems.
What kind of property can a bankruptcy dischargee purchase?
You can purchase a completed home, vacant land, or a newly built home as a discharged bankrupt. Construction cannot begin until you have sufficient equity to refinance to a lender who will approve your loan application for a total loan amount of 80% or less of the value of the finished property.
Renting through a property manager is a must because they can give the lender a copy of your rental ledger to show that you have a good repayment history for any property you have rented.
Living by the motto “on time, every time” will put you in the best position for a home loan approval. This also applies to any credit facilities you may still have or have obtained after filing for bankruptcy.
In essence, loans of this kind are provided to people who have experienced a life-changing event and were unable to meet their financial obligations at that time; for many, these events were out of their control. Having been bankrupt for three years and reestablishing yourself through a stable job and address, lenders of this type believe that you are now sufficiently credit worthy.
Speaking with an experienced mortgage broker who regularly works with clients who have credit history issues would be a wise choice if you want to learn about your options as a discharged bankrupt in order to buy property again without having to put up a sizable deposit.
