Posted: 1 Sep

Mortgage Refinancing after Bankruptcy Explained

Mortgage Refinancing after Bankruptcy Explained

After you declare bankruptcy, your credit ratings take a significant blow. As such, you become a perceived high financial risk, and lenders shy away from you. However, you can still improve your credit rating and qualify for loans, including mortgage refinancing after bankruptcy. If you have filed for bankruptcy, you may be wondering what happens if you need to refinance your mortgage in the future. Here are a few things you should know. Call us today to see how we can help in your individual situation.

How Does Bankruptcy Affect Your Mortgage 

Declaring bankruptcy does not wipe all your debts. Secured debts, such as mortgages, remain intact. The bankruptcy rules vary per province, but a general rule applies- you can’t keep your home if you have accumulated a lot of equity in it because the money from your equity is used to pay off your creditors, so refinancing may be better for you than being forced to sell.

However, if you have little equity in your home, you can agree with your lender to keep your home and keep making payments. Now, when your contracted period ends, you have to seek mortgage refinancing after bankruptcy. Your existing lenders may be willing to extend your mortgage. 

If not, you have to find a new lender for mortgage refinancing after bankruptcy. The good news is that if you were allowed to keep your home after going bankrupt and kept all your mortgage payments up to date, the lender cannot foreclose your home. However, if you fail to make timely payments, you violate the terms of your agreement, and the bank has a right to foreclose on your property. 

How to Access Mortgage Refinancing After Bankruptcy 

Once you file for bankruptcy, the next few years become vital in restabilizing your credit rating. First, you are discharged from bankruptcy after two years. Within these two years, you have to keep your record clean by making timely payments for your debts and bills.

Second, after getting discharged, you have to get credit lines. The credit lines can be anything from credit cards to a loan. You can also try saving some money. The lenders want to see that you are making an effort and bringing something to the table. 

You also have to pass the stress test by the government to qualify for mortgage refinancing after bankruptcy. The test aims to predict how your finances might be affected if you undergo a stressful financial situation, such as losing employment. Given that you already have a bankruptcy mark on your report, qualifying for mortgage refinancing after bankruptcy with a traditional bank becomes even more challenging.

If you’re lucky, your existing lender will be willing to go through with mortgage refinancing after bankruptcy. However, if not, you need to find a new lender. If this happens, there’s a higher chance that you will not find a traditional lender. 

Mortgage Refinancing with Private Lenders 

Fortunately, private lenders do not operate within the same rules as traditional lenders. Even if you cannot find a conventional lender to refinance your mortgage, you can always take your chances with private lenders. Private lenders often provide mortgage refinancing after bankruptcy because they focus more on home equity rather than your past financial difficulties. 

Even with a poor credit rating, a private lender can help you keep your home. If you’ve retained a consistent payment record and gotten credit lines after being discharged from bankruptcy, your chances of qualifying for a mortgage become even better. 

Get Mortgage Refinancing After Bankruptcy 

If you have declared bankruptcy or plan to do so, the important thing is to focus on the future. Continue making payments on time and spend wisely to avoid debt. More importantly, contact a mortgage broker to help you find a lender. If you need a mortgage refinancing solution after bankruptcy, contact Dominion Lending Centres today. 

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