Though it may seem impossible, refinancing your home loan after going through bankruptcy, it can be done as long as you can meet certain requirements. Finding a suitable lender may be challenging.
Refinancing After Bankruptcy is Possible
Refinancing a home mortgage is probably one of the few financial transactions that someone who has gone through bankruptcy can achieve within a small period of time after the bankruptcy has been discharged. In fact in Australia you can refinance your mortgage the first day after being discharged from bankruptcy.
Getting Ready for the refinance application
In order to do so, you need to make all your payments on time including your current home loan installments. This is essential since any late payments or missed payments may be an obstacle between you and your refinance home loan.
If you haven’t done so yet, open a bank account, either a checking or savings account and get a credit card. If you can’t get approved for an unsecured credit card, don’t hesitate, apply for a secured credit card and start using it and making regular payments. All this will help you build a healthy credit history and will ensure you get approved for a refinance loan.
Search for a Lender and ask for Loan Quotes
The search for a suitable lender is the main task you need to complete. You can refinance with the same lender that is currently handling your home loan, but don’t stick to the first offer you receive. Request loan quotes with every lender you run into and even request online quotes as you’ll be able to get much better deals this way.
Pay attention to Interest Rates and other fees
You need to pay special attention not only to the interest rate and fees charged by the lender that will refinance your home loan, but also to any punitive fees that your current mortgage loan lender may charge for pre-cancellation of your loan. These fees and costs may turn refinance too onerous to even consider the possibility.
You may have to pay a slightly higher interest rate since you’ve got a bankruptcy on your credit report, however, don’t let lenders take advantage of this situation.
Equity requirements are critical
To qualify for a refinance after bankruptcy, you need to ensure that you have sufficient equity in your home. Maximum loan possible is to 80% of the value of your home.