Refinance After Bankruptcy - How Does Your Bankruptcy Affect Home Mortgage Refinancing
Below is a MRR and PLR article in category Finance -> subcategory Wealth Building.
Refinancing After Bankruptcy: How Does It Impact Your Home Mortgage?
When considering refinancing your home after bankruptcy, understanding some key concepts is crucial. The type of bankruptcy you file plays a significant role in your refinancing options.
Types of Personal Bankruptcy
Chapter 7 Bankruptcy
Known as straight bankruptcy, Chapter 7 involves liquidating most of your assets to pay off creditors. You can keep essentials like an economical car and personal clothing.Chapter 13 Bankruptcy
Rather than liquidating assets, Chapter 13 allows you to work out a payment plan with a trustee, eliminating late charges and penalties. This plan helps you repay debts over a year or two while keeping your belongings. Lenders often view Chapter 13 more favorably since you’re actively attempting to repay what you owe.Refinancing After Bankruptcy
Chapter 13 Buyout
This involves taking a new loan to cover your existing mortgage and possibly other debts. It’s essentially a cash-out refinance, usually limited to about 85% of your home’s value.Working with Lenders
Post-bankruptcy, you’ll likely deal with sub-prime or non-prime lenders who specialize in assisting those with challenging credit histories. A mortgage broker with experience in this area can be beneficial.Timing and Credit Improvement
To secure better interest rates, it’s advisable to wait at least two years after your bankruptcy is discharged before refinancing. During this time, focus on repairing your credit by paying bills on time and in full.By understanding these elements and improving your credit, you enhance your chances of obtaining a more favorable refinancing rate.
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