Bankruptcy Equity Home Loan

Equity home loans have long been a way for home owners to use the increase in value of their homes to their advantage. Equity in a home is the difference between the mortgage amount and the increased value of the home from the time it was purchased. For example if you paid £200,000 for your home 5 years ago and it is now worth £250,000 you would have £50,000 equity in your home. Following bankruptcy, equity home loans are a very good way to not only secure a loan, but also to build back up your credit rating and repayment history.

There are many reasons why people choose to release the equity in their homes, for instance they may want to build an extension on the house rather than move to a bigger property, or perhaps use the money for renovating a kitchen or bathroom. In other instances, people use the money for non-house related things such as buying a new car or paying for a honeymoon, many parents have chosen to release equity in their homes to help their children raise the deposit for a house.

If you are trying to secure a loan after bankruptcy, or even if you are looking for a bad credit loan, then using your house as security is in fact a great way to do this. While you have to be aware that you risk loosing your home should you default on your loan, if you are sure you are able to manage the repayments then there is no reason why you should not look at releasing some of the equity in your home to give you some cash. Your mortgage lender will advise you on what percentage of your equity you can release, and many lenders will calculate this on a mortgage loan to value basis, so you will need to know the lending caps that are in place. You will be required to provide things such as proof of income, and the bank will want to arrange for a property valuation so they can have an accurate idea of how much the property is worth in relation to any outstanding mortgage.

There may well be additional costs associated with releasing any available equity, so be sure to find out what these are before you commit to any additional borrowing. It may be that these fees can be added onto you mortgage, or you will be able to borrow a bit extra to cover these fees, but this is something that will vary from lender to lender so will have to be dealt with on an individual basis. After bankruptcy, equity home loans can prove very useful during the period when your credit rating isn’t quite high enough for mainstream lenders to consider your applications, and can really help you back on the road to financial recovery.

Recovering from bankruptcy can be a long slow process, but there are steps that you can take that will help you build up a good solid credit foundation. While you have to be aware that you are securing debt on your home, using this as a guarantee will show potential lenders that you are serious about keeping up with your repayments.

When a lender is considering your application for an equity home loan, they will take many different things into consideration. The main one of course will be the amount of equity that is available in your home. Every lender will be different in the cap they set on the amount that can be taken out of your home, so if you find you are being offered less than you anticipated, be sure to check the cap they are using as you may find another lender will have a different level.

For this example we are going to use a cap of 75% of the home value. If your home is valued at £200,000, then the value that the lender will be working on will be £150,000. The amount of your outstanding mortgage will then be deducted from this, so for example you have £100,000 to repay on your mortgage, this will leave you with a potential £50,000 credit available against your home. Whether or not you receive the full amount is again down to the discretion of the lender, and of course you may not need the full amount to begin with anyway.

You may find you can borrow this money over a fixed period of time, such as 10 years – if you choose to do this you have to make sure that you will be able to repay it in time or you will be left facing a large lump sum repayment at the end of the term, which if you cannot repay may well put your home at risk. There is often an option to renew the credit borrowing term at the end of the initial period which means you don’t have to make this large lump sum repayment so be sure to clarify which time of equity home loan you are entering before you sign up to anything.

As with any form of post-bankruptcy credit, you may find that the interest rates on offer to you are not as attractive as those on the high street. However by taking out a post bankruptcy equity home loan you are offering such a good form of security that the rates you will be offered will be much better than for any form of unsecured credit.

Trying to borrow after after bankruptcy is difficult neigh on impossible without equity in your home. There are many specialist lending companies who, in the form of sub prime loans will lend to bankrupt discharged borrows, but interest rates are not in the borrowers favor.  After bankruptcy, the main factors that help you when it comes to borrowing money is the length of time that has passed since the bankruptcy was discharged and the bankrupt’s behaviour since said discharge. A minimum of two years since discharge is required (though some lenders may lend with less), and at that stage interest rates will still be pretty high. A person who has maintained a good credit record for 5 years after bankruptcy is in the best position to gain a competitive home equity loan provided:

• They are currently in long term regular employment
• They haven’t defaulted on any repayments in since their bankruptcy discharge
• They have shown themselves as able to handle credit responsibly since, by making payments on time
• They have managed to get some forms of unsecured loans, that aren’t in default
• They have managed to save a sum of money

If any of this criteria is a problem don’t despair, as there are still banks and financial institutions that are willing to lend to you. To find such companies you should start with an online search, and use their loan calculators to estimate what they are likely to charge. You do not want every company you approach to pull up your credit record – a high number of searches of your credit rating also counts against you. A loan broker may also be an option as they have access to loan databases, but you need to beware of the fact that they get paid commission and so may not recommend the best loan for your situation, but push a loan that will pay them the most. Once you have a positive offer continue searching as you may secure an even better loan, aim for 4 to 5 loan offers as you can compare interest rates and costings. Having a number of offers puts you in the position of negotiating a little, this can save you money too.

Bankruptcy stays on record for 7 to 10 years, but while this is a relatively long time,  managing  your credit carefully means you can still secure competitive home equity loans while the bankruptcy is still on your record.

After filing for bankruptcy, your personal credit record takes a serious knock that can have consequences for many years to come. Applying for a loan such as a home equity loan may seem impossible, but that is not the case at all. If you have been discharged from bankruptcy more than 12 months previously then the chances of securing financing from a sub prime loans company a quite high. This is provided that you have kept to your repayments schedule over the past year and have payed all repayments on time and not missed any either.

Two years after bankruptcy, your chances of securing a home equity loan are even higher, and as an added bonus your sub prime  interest  rate will not be as high.  If you still have difficulty borrowing it may be worthwhile to obtain a personal credit report in order to ascertain whether there are any irregularities that may be the result of a lender not adding the correct facts regarding your payment. Bear in mind that a bankruptcy will stay on your record for 7 to 10 years, so if you are able to do without a loan for the time being, when you o apply for a loan in the future you can expect a lower interest rate. The main thing to do is keep up to date with all payments in order to not blemish your credit report further.

Bankruptcy does still pose some stigma, mainly to financial institutions, but many people who have gone bankrupt go on to be successful in their lives and borrow again without any problems. If you do need to arrange a home equity loan but have become bankrupt prudence is the key. The best thing about a loan of this type is that it is secured on collateral and so banks are more likely to offer you a loan. The good thing about that is it will work in the favor of your credit report so you will be able to receive credit cards or car loans at better rates provided you do not default on any repayments. You are more likely to secure a home equity loan if you have managed to build up savings, as lenders look favorably on this, but this can be difficult, and having savings might mean you are not in need of the equity loan in the first place.

Also, be sure to check out several potential lenders regarding rates they are offering, but only allow lenders you wish to deal with to check out your credit record, as too many credit checks can have a negative effect on your credit rating.

You can apply for an equity home loan immediately after your bankruptcy has been discharged, but it is not recommended. It’s not advisable as the borrower faces higher than normal interest rates, in fact the more recent the bankruptcy discharge, the higher the interest rate is likely to be and the harder it is to get a loan. It is recommendable to wait for at least 2 years after having your bankruptcy discharged before making a home equity loan application. While securing a loan may be difficult, it isn’t impossible, so be prepared to search hard.

After bankruptcy, sub prime loans are the easiest to secure. Sub prime loan companies will be more willing to lend to people with blemishes on their credit history, but borrowing from them means you face premium repayments. For this reason it is necessary to shop around and not stop at the first positive offer. Financial institutions such as banks and credit unions have different lending criteria: some will not lend to people who have filed for bankruptcy, or have been discharged over 5 years previously. Others, such as sub prime companies have a less strict criteria and will lend  two years or less after bankruptcy discharge. There are however disadvantages to bankruptcy equity home loans; The borrower can expect to have higher repayments due to the higher interest rates. The higher rates are charged because people with bad credit records are considered to have more of a chance of defaulting on their repayments. Applying for a home equity loan with your current mortgage lender may not provide the best deal,  particularly if your credit rating has suffered since you secured your mortgage.Take advantage of all tools at your disposal to find the best potential lenders, including the internet, as this will save you  a lot  of time. Brokers can help with this, but bear in mind they are not usually impartial, but get paid a commission on the out come, so may not encourage you to take the best deal for you.

Sub prime lenders are usually more competitive when lending equity home loans when it comes to discharged bankrupts, as they specialize in this area of the lending market. Once you receive an offer, you should request a detailed breakdown of all payments incurred, including the APR amounts, from each potential lender. Do not stop at the first lender who gives you a positive answer, try to secure 4 or 5 offers and negotiate before entering an agreement.

Everyone is aware that bankruptcy has an adverse effect on your credit rating, but did you know that equity home loans are amongst the easiest ways to begin repairing your credit?If you have been bankrupt but have filed for bankruptcy over 12 months ago and have been in the same employment for 2 years or more then you stand in good stead in the eyes of potential lenders. Realistically it takes 2 years before you can again get on to the  ‘A’ list credit rating.

If you’re having trouble securing credit after your bankruptcy has ended, a direction to try would be a home equity loan. As a home equity loan is secured on the outstanding value in your home,  lenders are more willing to risk lending money to you, because (and here is the painful part) they will have to power to take your home if you fail to keep up with the repayments. If you are unable to obtain credit cards or mobile phones or even a loan to buy a car due to bankruptcy, then a equity home loan is most likely the answer. A loan secured on collateral is going to have a lower repayment rate compared to an unsecured loan, so it is the cheaper option despite the fact that your property is secured on it.

Other factors in securing an equity home loan after bankruptcy include employment. If you have been in secure employment for the previous two years, this will greatly increase the likely hood of lenders looking favorably at your loan application. Employment under a period six months means it is unlikely, though not impossible, to secure a loan but again having equity to secure the loan against greatly improves your chances.

When searching for a home equity  loan after bankruptcy, the same rule applies as before bankruptcy, in fact it’s even more important. Be prepared to put in the legwork and hunt around for the cheapest rates you can. do not stop at the first positive offer you recieve from a lender but keep going and try to get four or five offers in total. Then compare all the details and work out which offer suits your requirements most. Factors to consider are the loan term, the interest rate as well as any fees that might be payable. Afterall in bankruptcy, equity home loans may be your only means to improving your credit score to a respectable level.

If you have been made bankrupt getting a home equity loan will be more difficult than usual, but all is not lost – there are still lenders out there. After bankruptcy, your financial lending options are limited to mainly institutions that specialize in higher risk lending. In all likelihood they will charge repayments at a higher interest rate, but shopping around means you can secure as low an interest rate as possible. If you have equity in your home you drastically increase the likelihood of securing a loan, as lenders will prefer to lend money that comes with security. The downside of this is that as it is secured credit, if you fail to pay you risk losing your home.

Having equity in your home also increases the likelihood of getting as low an interest loan rate as possible even after bankruptcy.  For this reason it is very important to shop around and obtain several quotes from several banks and credit institutions, rather than stop at the first rate that seems to be low. It’s not impossible to find a low rate on an equity home loan, so look really give it some time to look. You must be prepared to negotiate well in order to secure the cheapest finance package available, and be prepared to shop around even after you achieve positive results. Aim to get at least four or five different home loan offers and take the time to go through the details; Which has the highest repayment rate? Or the longest term? Compare any subsidiary costs or arrangement fees before deciding on the best equity secured mortgage.

If you’re having trouble securing a loan, the reason may be that it’s too soon after your bankruptcy has closed for the financial institutions liking. If you can postpone applying for a loan for a period, ideally 12 months, during which it is vital to keep up with all bills and other repayments then you stand a much better chance of getting an equity home loan after bankruptcy, otherwise you affect your credit rating detrimentally.

A home equity loan is the best option for rebuilding your credit rating after bankruptcy, so it is a good place to start, as these types of loans are easiest to secure. Having other unsecured loans also greatly improves your credit score in the eyes of a lender as long as scheduled repayments are up to date and on time.