How To Get A Mortgage Even After Bankruptcy

Getting a Mortgage Loan After Bankruptcy

Many people dream of buying their own home but the need for a large deposit and the difficulty in obtaining a mortgage continue to prevent people from doing so.

In addition to this, a history of bad credit or unmanaged debt can make it harder to secure the funding you need to get on the property ladder.

This is one of the reasons why people are so hesitant to enter into formal debt resolution agreements.

Many believe that being declared bankrupt or making a consumer proposal will prevent them from ever buying a property, for example.

Similarly, many people are reluctant to admit they have debt problems or to explore credit counselling because they assume it will have a negative impact on their financial future.

However, resolving your debt problems can be the best way to ensure you’re able to buy a home in the future.

Contrary to popular belief, it is possible to obtain a mortgage after bankruptcy.

In fact, resolving your debt issues via bankruptcy could make it easier to get a mortgage than struggling on and managing your debt poorly.

What Does Bankruptcy Do to Your Credit Rating?

After you’ve filed for bankruptcy, your credit rating isn’t going to be particularly high.

Of course, it’s almost guaranteed that your credit rating wasn’t high before filing for bankruptcy either.

If you’re struggling to make minimum payments or have missed repayments, this will have already damaged your credit rating.

While filing for bankruptcy is going to have an impact on your R score, in reality it might not make a practical difference to your current financial standing.

When you have a bad credit rating, you’ll find it difficult to obtain any form of credit.

While payday loan lenders may offer people with bad credit small, short-term loans with high interest rates, you’ll find it tricky to access borrowing facilities from regular lenders.

Depending on how bad your credit rating is, it’s unlikely you’ll be able to obtain a mortgage straight after filing for bankruptcy.

It’s important to remember, however, that even if you didn’t file for bankruptcy, your poor credit rating would likely also prevent you from obtaining a mortgage at this time.

Improving Your Credit Rating After Bankruptcy

If you want to buy your own home, you’ll need to improve your credit rating and show that you’re able to manage your debts.

There’s a good chance you’ll be able to get a mortgage after bankruptcy and fulfil your ambition of owning a property with an improved credit score.

If you want to minimise the long-term impact bankruptcy could have on you, it’s vital to improve your credit score.

During the bankruptcy process, many people engage in debt management education.

This can be an extremely useful way of learning more about the industry and how people fall into the cycle of debt.

Even if you aren’t required to undertake these classes, many people find them to be hugely beneficial, so it’s certainly worth learning more about successful debt management.

After you’ve filed for bankruptcy, you’ll have the opportunity to improve your credit rating, if you choose to do so.

To ensure you’re able to obtain a mortgage after bankruptcy, you’ll want to take a strategic approach to enhancing your credit rating and money management.

Following your discharge for bankruptcy, you may want to apply for some form of credit.

Providing you manage this credit effectively; it will show potential future lenders that you’re able to be a responsible borrower.

This minimizes their risk in lending to you and, therefore, increases the chances of you being approved for a mortgage or an alternative form of credit.

While your bankruptcy is ongoing, it’s unlikely you’ll be able to obtain any form of credit, so plan your credit improvement strategy for the two or three years following your bankruptcy discharge.

Immediately following your discharge, it’s likely you’ll be able to obtain a credit card.

Beware, however, because your bankruptcy and poor credit rating will probably mean you can only access credit with a high interest rate.

By making repayments, meeting your obligations and clearing the balance each month, however, you can improve your credit rating and your financial standing.

Over time, you may want to add another form of credit to show that you’re able to handle multiple debts.

Don’t be tempted to apply for as much credit as possible following your bankruptcy discharge.

Instead, use the time to show you can manage one form of credit and, when your rating improves, apply for another form of credit with better terms and a lower interest rate.

Typically, mortgage lenders won’t consider accepting your application until two years following your discharge from bankruptcy.

During this time, they’ll want to see that you’ve managed at least two forms of credit and have obtained more than $2,500 in new credit.

These are highly realistic goals for anyone after bankruptcy, so there’s no reason that resolving your debts in this way will prevent you from obtaining a mortgage in the future.

Getting a Mortgage After Bankruptcy

If you’re struggling with debt problems, filing for bankruptcy could actually increase your chances of obtaining a mortgage in the future.

As bankruptcy will eliminate your debts, it prevents your credit rating from being decimated further as you continue to miss payments.

Furthermore, your total debt is eradicated via bankruptcy, rather than increasing due to rising interest rates and missed repayments.

After filing for bankruptcy, you’ll also have substantially more income each month, as you won’t be trying to pay multiple debts off.

This will give you the opportunity to budget for essential expenditure and avoid getting into unmanageable debt once again.

With the potential to reset your finances, filing for bankruptcy could be an effective way of eliminating your debts and protecting your financial future.

If you want to find out more about the long-term effects of bankruptcy, talk to a Licensed Insolvency Trustee today.

Contact Bankruptcy Canada now on (877)879-4770 and we’ll provide all the information you need.

Canadian Bankruptcies

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What is Bankruptcy?
Bankruptcy FAQs
How Does Bankruptcy Work?
What is the Cost of Bankruptcy in Canada?
How to Rebuild Credit Following Bankruptcy
Personal Bankruptcy in Canada
What Debts are Erased in Bankruptcy?