Interested in a mortgage after bankruptcy?

The guide that will lead you to the approval of the application

Obtaining a mortgage after bankruptcy is possible but requires the applicant to prove responsible banking conduct as well as preparation for a complex process that requires a lot of planning.

Therefore, the right thing to do would be to prepare for the application with the help of a consultant specializing in mortgages for bankrupts

In collaboration with legal zap

13/09/2022

Tuesday, September 13, 2022, 1:31 p.m. Updated: 2:29 p.m.

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Before the first application for responsible banking conduct staff (Photo: ShutterStock)

Obtaining a mortgage after bankruptcy is possible, but requires the applicant to prove responsible banking conduct.

Otherwise, it is likely that the bank will reject his application based only on the fact that there is a bankruptcy in his past.

Any such refusal only further increases the chance that future applications will also be refused.

Therefore, it is recommended even before the first application to establish responsible banking practices.

This is a complex procedure, not a short one, that requires a lot of planning.

Martio Boxdorf, who specializes in obtaining a mortgage for bankrupts, explains in the following lines what it is all about.

"A mortgage is a loan of a very high amount, which is repaid over a long period of time, sometimes 20 and 30 years. Therefore, for mortgage banks it is important, really critical, to make sure that the mortgage applicant is reliable, responsible and able to repay.

In the case of a bankrupt, this is actually a person who has already He proved to the bank the opposite, in practice. That is, that there was at least one time in his life when he got involved in debts that he could not repay."

"The bankruptcy procedure, what today is called insolvency and financial rehabilitation, may allow that person to write off some of the debts, but it does not indicate his ability to repay and his reliability. On the contrary, the writing off of the debts, which is part of many bankruptcy procedures, testifies to the fact that in practice that person Adam was unable to repay the full debt, despite the economic rehabilitation he underwent."

"It's a logical conclusion perhaps, but I'm happy to inform you that it's also completely wrong. A mortgage for bankrupts is definitely possible, even though it's a more complex process."

"First, it is important to understand that mortgage banks usually agree to approve a bankrupt for a mortgage whose repayment amount does not exceed a third of his net salary. That is, there is a limit on the amount of the loan he can receive and he will be required to have higher equity. In addition, the bank will require that the former bankrupt prove It is clear that his financial and banking conduct is orderly, responsible and stable, and this is where the real complexity begins."

What is responsible banking?

"Banking is a general name for how your bank account is managed, in all its parts," explains Boxdorf.

"That is to say, the conduct of the current account, savings, credit, various loans, and the like. Responsible banking conduct is expressed, for example, in managing a current account without a minus and without repeated checks, and in timely coverage of both small and large loans."

"Banking is not necessarily related to the amount of income you have. There are those with low incomes, even very low, who make sure to manage their budget responsibly and do not enter into debts that they cannot repay. On

the other hand, there can be a person with very high incomes that allow him to take out very large loans , even if he has trouble meeting their repayments, or he spreads checks that have no cover and at the same time travels abroad"

"Correct banking conduct is, as mentioned, one that shows stability and responsibility and raises the credit rating of a former bankrupt. Only in this way can he restore the trust of the banking system towards him. For bankrupts, this is a gradual and continuous process, and therefore the first rule for correct banking conduct After bankruptcy, the first thing is to be patient and understand that this is a process that requires time."

"Certainly it is worth doing, and even a lot. Immediately after receiving the discharge, you should open a new bank account. It is recommended to do it immediately, even if you still have no income at all, and it is important that it be in a new bank and different from the one where you had problems with banking. This is the first step. When there is already some income, it is important to make sure that it is all deposited in the bank account, and if possible it is highly desirable to open some kind of savings plan, even a small one. These two are significant evidence of the calculated financial conduct of a person who looks ahead and manages his expenses frugally and with an eye to the future."

"It is better to pay regular payments, such as electricity bills, water and property tax, by direct debit through the same bank account. It is important to avoid temptations and benefits such as paying by credit, because a direct debit is a clear sign that the account holder has no intention of avoiding his debts and it raises his credit rating. In addition, After a certain amount accumulates in the savings plan, it is recommended to request a debit card in exchange for the savings pledge."

"Because the goal is not only to prove that you can repay debts, but that you are aware of your ability to pay and behave differently than in the past. Therefore, it is better to wait several months of proper banking behavior before applying for a credit card. Even then, it is recommended to avoid tempting gifts and benefits and to apply for a credit limit that does not You will be too high for your abilities and will put you in debt again."

"No. Before approaching the bank and applying for a mortgage after bankruptcy, you should carefully plan how to present the correct and responsible banking behavior in a convincing manner. Otherwise, the chance that the bank will reject your application because of your past as a bankrupt is still very high."

"As mentioned, the goal is to convince the bank that after the bankruptcy procedure has ended, your banking conduct is exemplary and that there has been a fundamental change compared to the conduct that led you to bankruptcy. It is possible, for example, to produce a credit data report that includes detailed information about the financial conduct.

The report reflects very clearly the financial conduct, not only in the bank, but in general, before the bankruptcy and from the moment of receiving the discharge within it.

The report should be issued long before that and make sure that there are no additional debts beyond those that led to the bankruptcy. If such debts are discovered, it is advisable to take care of them, issue a new report that indicates that they have been taken care of, and only then proceed to apply for a mortgage."

In conclusion, says Boxdorf : "A mortgage for bankrupts is possible, but it is a complex procedure that needs to be well planned in advance to avoid refusal.

Otherwise, each refusal further reduces the chance that future applications will be approved.

I recommend using a mortgage consultant who specializes in mortgages after bankruptcy.

A mortgage consultant who is an expert in the field will direct you to the correct banking behavior according to your specific case, and throughout the whole process will know when to put the 'breaks' on you and when you should actually shift gears, give gas and submit the application for a mortgage to the bank."

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article is courtesy of Zap Laws.

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