Can You Renew A Mortgage After Bankruptcy
Mortgages are a form of secured debt.
Thus, even if you cant make repayments, the lender still has collateral – the sale price of the house.
Many banks, therefore, are willing to renew mortgages with you, even if you go bankrupt.
The reason is that they can always repossess your property and sell it on if you fail to make mortgage payments.
Furthermore, banks have an incentive to provide those who go bankrupt with mortgage renewals.
When they foreclosing on a property, they must put the property on the market for a discount.
Refusing to lend to you, therefore, could mean that they lose money, on both the interest you pay over the lifetime of the mortgage and the reduced value of the property.
Most people who go through bankruptcy, therefore, continue with their existing mortgages.
You may still want to discuss the issue with your lender to get their confirmation.
Usually, they will agree to renew if your payments are up to date.
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Do Bankruptcies Affect Second Mortgages
Second mortgages and home equity lines of credit are also impacted by bankruptcies. If you have a second mortgage or HELOC, youre not responsible for it under a Chapter 7 bankruptcy, but youre required to keep paying on it if you want to keep the house without a problem.
Things become a little more complex with a Chapter 13 bankruptcy. If you can prove that your existing equity isnt enough to cover what you owe on a second mortgage or HELOC, you can present that evidence in bankruptcy court. If a judge agrees, the junior lien taken out after your first mortgage may be stripped off.
One thing to note is that a lender may fight this, so to give yourself the best chance of success, you may want to have an appraisal done before you file for bankruptcy.
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Check Your Credit Report For Mistakes
After you are discharged from bankruptcy or have completed your consumer proposal, you should request a copy of your credit reports.; Equifax and Trans Union are the two major credit bureaus.; If you discover issues such as a debt you included in your bankruptcy not being reported properly you can request that the mistakes be corrected.
Make Sure The Right Accounts Were Reported
After your debts are discharged, review your credit reports to make sure that only the accounts that were part of your bankruptcy are reported by the as discharged or included in bankruptcy on your reports. If you find mistakes, notify the credit bureaus and dispute the errors on your credit reports .
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How Do I Know How Much Equity I Have
You can calculate your homes equity by taking the value of your house, and subtracting the amount you owe on your mortgage and the currently owed property taxes from this value.
House value amount owed on mortgage currently owed property tax = Equity
In most personal bankruptcies, the home must be sold so that this equity value can go to your creditors.
What Are The Consequences Of Breaking Your Contract
Simply put, it depends on the terms dictated by the contract itself. Buyers backing out of their contracts is an inevitable occurrence whenever the real estate market takes a dip. Lets say that a house this month is worth $500,000. A buyer agrees to purchase the house for that much, but the market drops before the closing day, reducing the homes value to $400,000. The same type of issue can occur if the lenders appraisal comes back at less than the sellers initial asking price. Whatever the reason for the buyers retracted offer might be, they may suffer heavy legal consequences if they dont meet the terms of their contract.
Loans Canada Lookout
To learn more about the foreign homebuyers tax, . ;
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Northwest Territories Bankruptcy Exemptions
In the Northwest Territories, property exempt from seizure in bankruptcy is set out in the Exemptions Act and applies to the equity in an asset. Equity is the difference between the value of the asset and what you owe on the asset.
Example: If you have household furniture and equipment in your home worth $5,000 and you do not owe any outstanding loans on these items, the equity you have is $5,000. In the Northwest Territories, the exemption for the total of these items is $5,000. In this case, you would be entitled to keep these possessions and your creditors cannot take them from you.
Every Bankruptcy Is Different
This post gives an overview of some of the major challenges when buying real estate through the bankruptcy court. However, the most important thing to remember is how different each and every transaction will play out in the bankruptcy process. There is no great way to predict your success or failure, and you need to be prepared for a bumpy process where you may or may not get the home. There is a ton of complexity that cant be discussed in a short article like this, and you will be best served by working with real estate professionals and attorneys who are well-versed in the bankruptcy process if you intend to make an offer. Seek your counsel carefully, as most agents and attorneys have no experience in this type of transaction.
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Dealing With The Equity In Your Home
Another issue for homeowners that declare bankruptcy is the in their house.; Equity is the amount of money you would receive if you sold your house.
For example, if your house sells for $200,000, but the mortgage is $150,000, and the real estate commissions and legal fees are another $10,000, the equity in your house would be the difference, or $40,000.
The specific rules about how equity in your home is treated in a bankruptcy are different in each province, so you should for an explanation of the law in your province.; In some provinces you are permitted to keep some equity; in other provinces all house equity is an asset of your estate, and must be turned over to the trustee.
This does not mean you lose your house, but you do lose the non-exempt equity.; For example, if you have seizable house equity of $10,000, you could allow the trustee to sell your house, or you could make an arrangement with the trustee to pay the $10,000 in equity into your bankruptcy estate .
Of course if you are declaring bankruptcy it is unlikely that you have $10,000 in cash. You still have options however. You can borrow the funds from family and friends or arrange to pay that amount to your trustee in monthly installments during your bankruptcy. ;This will however increase the total monthly payment you need to make. If you are in 9 months, what happens if you cant afford these payments? ;The solution could be to look to a consumer proposal.
Buying A Home After Bankruptcy
If youve declared bankruptcy in the past, know that youre not alone.; Further, know that your situation is nothing to be ashamed of.; No one wants to declare bankruptcy; sometimes, it may be the only solution to a difficult situation. ;If youre now thinking of buying a home after bankruptcy,;you may be wondering how it would work.
I see lots of clients after their bankruptcy has been discharged or their consumer proposal has been completed. Theyll often tell me they dropped in at their bank branch or another mortgage broker, but they have either been turned down or found that their calls for information dont get returned. ; This may give the mistaken impression that there is nothing to be done.; Dont be discouraged!; You can and will put this behind you. You just need the right planning and commitment.
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How To Redeem Your Bonus Reward Points
The bonus points or miles you earn on your credit card can be redeemed for rewards. Depending on the credit card, you can choose between rewards such as travel deals, cash back, airline miles, and merchandise. Choose which credit card you want to use based on the sign-up offer you think will benefit you the most. If the spending requirements match your budget and you will easily be able to pay back how much you owe, you can earn cash back or great rewards as you spend on your new card.
Which Credit Score Is Used For Mortgages
FICO is the most common score used in the mortgage-lending business. Scores generally range from 300 to 850. FICO has many different scoring models, like FICO, FICO 8, and FICO 9. A person’s score usually varies depending on the model used to produce it and which credit reporting agency provided the underlying credit report. Fannie Mae and Freddie Mac, for instance, generally require mortgage lenders to use the “Classic FICO” credit score to measure credit. The Classic FICO score is also called these names at the major credit reporting agencies:
- Equifax Beacon® 5.0
- Experian/Fair Isaac Risk Model V2SM, and
- TransUnion FICO® Risk Score, Classic 04.
As of October 2020, Fannie Mae generally requires borrowers to have a , depending on how the loan was underwritten. Depending on the circumstances, Freddie Mac requires a score of 620 or 660 for a single-family primary residence. Of course, lenders may have requirements that are stricter.
A foreclosure might cause your FICO score to drop by a hundred points or more, perhaps below 550. So, even after the three-year foreclosure period, you might not qualify for FHA’s low down payment loan, which requires a score of 580. You could still qualify for an FHA loan with a 550 FICO, but instead of making a 3.5% down payment, your down payment would be higher, at least 10%.
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Getting A Mortgage After Bankruptcy
When you file for bankruptcy, the trustee must recover as much debt as possible for your creditors.
For that reason, they will sometimes investigate whether they can use the equity youve built up in your home to repay the debt that you owe.
Equity is the difference between the market value of your property and the amount that you owe your mortgage lender.
If you have a substantial amount of equity in your property, the trustee may allow you to keep living in your property, so long as you keep making repayments to the mortgage provider.
Hence, you can continue paying off your existing mortgage, even after you file.
Even if you dont have a lot of equity in your property, the trustee may allow you to keep your property if you use it to contribute to your bankruptcy estate.
Often, this means taking out a second mortgage to cover the cost of repayment – something that banks may be willing to do if you have a good repayment history with them.
When Is A Discharge Challenged
A bankrupt’s discharge may be opposed by creditors, the LIT or the BIA if the bankrupt has failed to meet his/her obligations or has committed an act of misconduct under the Bankruptcy and Insolvency Act of the BIA). The Court will then review the opposition and render a decision.
There are four types of discharge:
- Absolute dischargeThe bankrupt is released from the legal obligation to repay debts that existed on the day the bankruptcy was filed, with the exception of certain types of debt.
- Conditional dischargeThe bankrupt must meet certain conditions to obtain an absolute discharge. Generally, the bankrupt will be required to pay a certain amount of money over a specific period. However, the Court may also impose other conditions. Once all conditions have been met, an absolute discharge will be granted.
- Suspended dischargeAn absolute discharge that will take effect at a later date.
- Refused dischargeThe Court has the right to refuse a discharge.
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How Do I File For Bankruptcy
The first step is to meet with an MNP LTD Licensed Insolvency Trustee. Together, you will review all available options, including bankruptcy alternatives like consumer proposals, debt consolidation and credit counselling. If, after going through your options, you decide that bankruptcy is the right debt relief solution for your situation, your Licensed Insolvency Trustee will guide you through the process in detail.
Save For The Biggest Down Payment Possible
So youre in the process of re-establishing your credit and have put yourself in a better place to take on a mortgage, but dont run out to your bank or mortgage agent just yet! ;Michael and Bev explain that a mortgage is possible at a 5% down but you will pay a cost in terms of mortgage insurance. ;Any down payment below 20% is generally considered a low down payment which will trigger mortgage insurance.
Twenty-percent;is the ideal down payment because not only do you take a chunk out of your monthly mortgage payment, but you also avoid a mortgage insurance charge being tacked on your bill each month. when you have a low down payment mortgage, you pay the same rate to the bank as someone with 20% and similar credit, but you also pay an insurance premium on top of that. Michael explains this approach stating that,
the kind of inverse system that we have here is that when the risk is removed, the lender provides a better interest rate, but that comes with a mortgage insurance premium. ;So there is a bit of a Catch 22 there. ;If you want the best rates and not paying an insurance premium, youre going to have to put down that 20%.
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How To Get A Mortgage After Bankruptcy Or Consumer Proposal
The road to Home ownership;past Insolvency is often misunderstood. You have probably ;been told by both your nosy neighbor & your omniscient hairdresser, that you cannot buy;a property for 7 years;after filing for bankruptcy and 3 years after completing your Consumer Proposal.
With little to no knowledge on the subject, you are likely to believe such statements. However, wed like to clarify that not only are such statements misleading, but blatantly they are blatantly wrong! In the following paragraphs, we would like to discuss the following;three scenarios;for you to consider & use if you have been recently discharged and are looking towards home;ownership:
First, we would like to discuss;buying a;home with minimum down payment;using;CMHC insurance.
Secondly, its also important to;discuss other alternatives available for home purchasers where mortgage insurance is not available.
Last but not least, we are going to touch on;refinance as well.
We hope that by the end of this article you have a clear understanding of all the options available to you on your upcoming mortgage transaction.
1. CMHC is a regulatory body that governs;the mortgage industry in Canada. If you are looking to buy with minimal down payment, you would need to qualify for CMHC insurance in order to obtain a mortgage approval. CMHC essentially plays a role of a gatekeeper making sure that all high ratio mortgages maintain a certain level of quality when underwritten by the Lender.
Bankruptcy Exemptions In New Brunswick
- Furniture, household furnishings and appliances up to $5,000
- No limit on clothes for you and your family
- Enough food and fuel for you and your family for three months
- Tools used by you in the practice of your trade up to $6,500
- One motor vehicle up to $6,500, if needed for employment
- Dogs, cats, and other domestic animals belonging to you
- No limit on medical or health aids for you and your family
- Certain government pension plans are exempt from bankruptcy
Buying A House After Bankruptcy: Ways To Woo A Lender
To start the mortgage process, lenders require a detailed letter explaining;why you needed to file for;Chapter 7 or Chapter 13 in the first place. Ideally, the bankruptcy would have been caused by an extenuating circumstance beyond;your controlsuch as the death of an income-contributing spouse, the loss of employment, or a serious illness.
In other words: A lender likes to see that you were hit with hard times that;had a significant negative impact on your expenses or income, and made it impossible to meet your;financial obligations.
What;a lender;wont want to see is someone with a die-hard shopping habit or a lackadaisical attitude toward paying credit cards on time. If thats you, youll have to prove youve changed.
Whatever the reason you filed for bankruptcy, lenders will need to properly document your extenuating circumstances, so be prepared to provide proof detailing your life event.
Medical bills, a doctors note, a death certificate, or severance paperwork are all acceptable evidence that prove to lenders that you are a safe bet worthy of a home loan.
The Home Buyers Amount
You get access to this tax credit when you purchase your first home and submit a tax return. Its an effective means of offsetting some of the upfront costs associated with buying a home. Eligible homebuyers may receive a tax credit of up to $750.
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