Getting approved for a mortgage after bankruptcy or loan default can be difficult. But it’s not impossible! We understand that life happens and people need second chances. Platinum Mortgages specialises in finance solutions for those with difficult circumstances. Read on to learn about getting a mortgage after bankruptcy or a loan default in New Zealand.
How does bankruptcy or loan default affect my mortgage application?
When you apply for a mortgage, the lender will calculate the risk in lending you money by looking at your credit score and credit history.
Your credit score is between 0 to 1,000 and reflects your credit history. This includes whether you pay bills on time, have defaulted on a loan, or have been discharged from bankruptcy within the last five years. The higher your number, the better your credit score and, therefore, the lower your lending risk.
You can improve your credit score by consistently paying your bills and repayments on time and avoiding applying for credit.
Do I have to wait five years for my credit score to recover after being discharged from bankruptcy or defaulting on a loan before I can apply for a mortgage?
You can apply for a mortgage as soon as you’re discharged from bankruptcy and any time after defaulting on a loan. The challenge is in getting the application approved.
It’s unlikely that you would get a mortgage with a bank while you have a low credit score. Fortunately, some alternative lenders loan to those with bad credit. They will charge higher interest rates to offset the higher risk of the loan. There may also be additional costs, such as broker and lender fees. You would also need at least a 20% deposit; if you can build a bigger deposit, even better! A higher deposit will make the loan less risky for the lender.
To improve your chances of getting a loan, consider whether someone would be willing to be a guarantor. A guarantor is someone who agrees to guarantee your mortgage, committing to being responsible for repaying the mortgage if you can’t. Having a guarantor can increase your chances of getting a mortgage, as it decreases the risk for the lender.
How do I get a mortgage with previous loan defaults or as an ex-bankrupt?
While some lenders require two or more years to have passed after a discharge from bankruptcy, there are exceptions – including lenders that will consider an applicant just one day after discharge. The challenge is finding the right lender, which is why using a specialised mortgage broker is so important.
As a company specialising in non-bank mortgages, Platinum Mortgages has access to several lenders who do higher-risk loans. We’ll manage the process, provide guidance on how to improve your chances of getting approval. We will ensure that you understand the costs and risks. We’ll also help you plan to eventually refinance the mortgage back to a main bank. This is normally done, once your credit score has improved. When you can refinance to a main bank, we will manage the process for you.
Whether it is worth the additional cost of getting a mortgage now or waiting for your credit score and credit history to improve is entirely down to you and your circumstances. We can help you understand your options and put a plan in place that best suits you. Get in touch today to get advice specific to you.