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.