Bankruptcy Equity Home Loan

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.