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.
You will need to be able to fund the cost of the LMI waiver fee, which at a borrowing level of 95% could be approximately 2% of the funds borrowed, this fee is charged in lieu of Lenders Mortgage Insurance, which is unavailable for borrowers who have been declared bankrupt.
So you would be wise to consider saving in the region of between 7% to 9% of the purchase price of the property, considering there may be transfer duty to pay as well.
Interest rates are an important consideration, they most certainly are not as low as those for people who do not have credit history problems, but the ability to switch to a lower rate is possible once 20% equity has been established in the property, subject to being discharged greater than two years.
What type of property can a discharged bankrupt buy?
As a discharged bankrupt you can buy an established dwelling to live in or as an investment property, newly completed dwellings or vacant land. You will be unable to build until you have enough equity to refinance to a lender who will approve your loan application for a total loan amount of 80% or less of the completed property’s value.
You will need to show solid repayment history for any property that you have rented, so renting via a property manager is a must, they will be able to provide the lender with a copy of your rental ledger to confirm that you have paid your rent on time.
The same applies for any credit facilities you may still have, or have obtained post bankruptcy, living by the mantra, “on time, every time” will put you in the best position for a home loan approval.
In essence, loans of this type are made available to people who have suffered a life changing event and who were unable to meet their financial commitments at that time, for many, these events were beyond their control. Lenders of this type take the opinion that having been in bankruptcy for three years and having re-established yourself via long-term employment and residential status you are sufficiently credit worthy again.
So as a discharged bankrupt there are available options to purchase property again, without having to come up with an enormous deposit, speaking with an experienced mortgage broker who deals regularly with people who have credit history problems would be a wise choice.
