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How to Refinance Your Mortgage After Bankruptcy

How to Refinance Your Mortgage After Bankruptcy

How to Refinance Your Mortgage After Bankruptcy

How to Refinance Your Mortgage After Bankruptcy?  We get this question a lot and we hope to provide you some insight into how to accomplish this. Bankruptcy is an important tool that allows those who have fallen on hard times to ‘reset’ themselves financially, erasing their debts and giving them a second chance to build a life.

Many Canadians who find themselves faced with a need to declare bankruptcy worry about what it means for the future. Will they be able to get a mortgage? Will they have access to the financial products someone with a simpler financial history enjoys?

The good news is that while bankruptcy is certainly not something that should be entered into lightly, it’s far from a crippling mark on your credit record.

Refinancing a Mortgage After Bankruptcy

Bankruptcy is becoming increasingly common. In October 2019 alone,13,200 Canadians filed for bankruptcy; the highest number in a decade. When a person declares bankruptcy, there’s a period of between nine and 36 months, depending on their circumstances, where they’re required to make payments to their creditors and aren’t allowed to take on new liabilities.

After that period, they can be discharged from bankruptcy. At that point, it’s possible to build a new financial life. Creditors look at a person’s beacon, or credit score when deciding whether they’re worthy of being given a loan. Post-bankruptcy, rebuilding a good score is important.

Repairing Your Credit After Bankruptcy

It may take some time to rebuild your credit history following bankruptcy. The first thing to do is request copies of your credit record from the main credit reference agencies. In Canada, there are two main credit bureaus:

It’s important to check your records with both. Make sure that all of the debts included in your bankruptcy have been removed from your credit file. If any of them are still there, contact the creditor and ask them to remove the record.

In addition, make sure your name, address, and financial links are correct. Incorrect details can be incredibly damaging and may cause lenders to erroneously flag any applications for credit as suspected fraud.

After checking your credit file, it is recommended that you get a secured credit card to help reestablish your credit.  There are a number of options, just do a bit of research on what card suits your needs the best.

Furthermore, make sure that you pay all of your bills in full and on time. Set up automated payments for this if possible.

Showing that you’re able to manage credit, even in small amounts, responsibly is key to getting access to the best rates available on the market.

Finding a Mortgage Lender Post-Bankruptcy

Mortgage providers perform extensive checks on all applicants, whether they have a bankruptcy in their past or not. These checks include:

  • Loan to value: How much will you borrow compared to the value of the property?
  • Affordability: How much is the mortgage compared to your income?
  • Term: Will you have paid off the mortgage when you retire?
  • Credit history: Do you have defaults or missed payments in your credit history?
  • Current finances: Do you have other debts that may impact your ability to pay the mortgage?

If you want to remortgage before or immediately after being discharged from bankruptcy you will want to work with an experienced mortgage broker. An experienced mortgage broker will have access to alternative lenders who offer competitive interest rates for clients facing financial challenges.

If you can wait for two years from the date of discharge and manage your finances well in that time, you’ll be in a much better position but this isn’t always an option.

The two-year mark is important because this gives you the chance to build up two years of on-time payments and a good beacon score. With a good record, you can work with a prime lender who will give you favorable interest rates for your mortgage.

If you can’t wait, that’s ok, you still have options.

Alternatives to Bankruptcy

Bankruptcy isn’t the only option for someone who has fallen on hard times and is unable to service their debts. If you’re considering bankruptcy but aren’t sure if it’s for you, consider a consumer proposal as an alternative.

Consumer proposals allow an individual to negotiate a legally binding agreement with their creditors. This option is open to those who are currently employed. Or for those who have some other form of consistent income but who are not able to repay the full amount of their debts.

Whatever option you elect to take, there is almost always an opportunity to refinance your home if you pick the right mortgage broker.

Why Choose Us?

If you’ve been bankrupt or are coming to the end of a consumer proposal are considering refinancing, give us a call. We provide free consultations and have over 30+ years of experience.  Call us toll-free at 1-877-383-1577 or apply online and get your finances back on track today!