Posted: 1 Mar '21

The Facts of Refinancing a Mortgage After Bankruptcy

The Facts of Refinancing a Mortgage After Bankruptcy

Declaring bankruptcy is never the first option, but sometimes it's unavoidable. After declaring bankruptcy, your credit report and credit score take a significant blow. Fortunately, it's possible to make a financial recovery and get back to good standing with lenders, especially for mortgage refinancing after bankruptcy. If you have a mortgage and plan to file for bankruptcy, there are several things you should know. Contact us for more information.

What Happens to Your Mortgage When You're Bankrupt? 

It's critical to remember that your mortgage is a secured loan, and as such declaring bankruptcy does not affect your mortgage. Also, being relieved from some of your debt can help you focus on your monthly mortgage payments. Some banks also offer automatic renewals. They may not pull your credit report once more, which means that you may keep your home and continue to make monthly payments.  

If you prefer to avoid declaring bankruptcy, you can choose to get into a consumer proposal. This legally binding arrangement allows you to pay creditors a part of what you owe with the help of a Licensed Insolvency Trustee. You may fail to qualify mortgage renewals after consumer proposals with your current lender. However, you can find private lenders who specialize in mortgage refinancing after bankruptcy, or renewals after consumer proposals. 

Mortgage Refinancing After Bankruptcy  

Unfortunately, declaring bankruptcy or filing a consumer proposal affects your ability to qualify for mortgage refinancing with prime lenders. If you were hoping to secure mortgage refinancing after bankruptcy discharges, your chances are slim.  

However, if refinancing with your current lender is impossible, you can explore private lenders for a mortgage. Private lenders who specialize in bad credit handle mortgage refinancing after bankruptcy.  

What's more, if you were consistent with payments leading up to your bankruptcy or consumer proposal, you stand to qualify. The important thing is to focus on rebuilding your credit report after bankruptcy.  

Personal Bankruptcy V. Consumer Proposals 

Declaring personal bankruptcy or getting into a consumer proposal are both different ways of dealing with debts.  

  • Consumer proposals allow you to keep most of your assets, unlike bankruptcy.  
  • Also, a consumer proposal may stay on your record for 3 years versus bankruptcy, which stays on record for 6 years—as such, filing a consumer proposal allows you to qualify for mortgage renewals after consumer proposals within a short period.  
  • What's more, you'll likely qualify for mortgage renewals after a consumer proposal before finding mortgage refinancing after bankruptcy because you'll improve your credit rating faster.  
  • A consumer proposal also organizes regular and fixed payments to your creditors, which allows you to organize payments. However, in bankruptcy, the payments may vary monthly, depending on your income.  

What to Remember  

After struggling with debt and declaring bankruptcy or filing a consumer proposal, focus on rebuilding your credit.  

  • First, consider getting secured credit cards and using the cards to settle bills and make purchases. As long your keep your spending within reasonable margins, your credit rating improves.  
  • Remember to pay all your bills on time because they also affect your credit rating.  
  • Attend your financial counseling sessions as required.  
  • Look for short-term mortgage refinancing after bankruptcy. Since your credit rating plummets and your risk increases, you'll get high interest rates from lenders. However, there's no need to pay high interest rates for longer than necessary.  
  • Save up for large down payments for mortgage renewals after consumer proposals and closing costs for mortgage refinancing after bankruptcy.  
  • If necessary, change properties instead of paying for a mortgage you cannot afford.  

How Can We Help?  

When it comes to mortgages and bankruptcy or consumer proposals, having the right lender by your side makes a significant difference. If qualifying for a mortgage refinancing after bankruptcy with your current lender is impossible, consider the Bad Credit Mortgage Broker team at Dominion Lending Centres. Contact us today for more information. 

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