Bankruptcy is never an ideal situation, but sometimes it is unavoidable. Even if you have filed for bankruptcy, you may still be able to get a home loan. Bankruptcy is a legal process that allows people or businesses to have their debts wiped clean, giving them a fresh start. When someone is declared bankrupt, they are released from most of their debts and are no longer required to pay them. Their assets may also be sold off to help pay back creditors.

Bankruptcies can give you a fresh start by erasing your debts and giving you a clean slate. Although rebuilding your credit will take some time, you can eventually get back on your feet financially.

How Soon after Going Bankrupt Can You Get a Home Loan?

If you're looking to get a home loan after you've been discharged from bankruptcy, it's best to wait a couple of years. Your bankruptcy will show up on your credit report for two years after it ends or five years from the date you became bankrupt, whichever is later. This can make getting approved for a loan challenging, so it's best to wait until your credit score has improved.

The AFSA will monitor your financial behaviour after you have been discharged from bankruptcy. If you do not comply with the AFSA, you may be penalised with an extension of the bankruptcy period or even imprisonment.

Applying for a Home Loan after a Bankruptcy

Home loans can be more difficult to obtain after bankruptcy because lenders want to be confident that borrowers will be able to repay the loan. A bankruptcy on a credit file can make it harder to get approved for a home loan. Lenders may check the National Personal Insolvency Index (NPII), but in any case, borrowers need to notify the lender about bankruptcy.

Major lenders are usually unwilling to give loans to people who have gone bankrupt. If someone had a home loan with a lender and went bankrupt, the lender is unlikely to provide them with another loan. It is often recommended that people in this situation look for a specialist lender who may be more willing to give them a loan.

How Different Is Getting a Home Loan When You're Bankrupt?

A subprime mortgage is given to borrowers with a low credit score. Because these borrowers are considered to be a higher risk, the terms of their mortgage are often different from a regular mortgage. For example, a subprime borrower may have to pay a higher interest rate or put down a larger deposit than a borrower with good credit. Here are some factors affected by your particular case:

  • Interest Rates

The record-low interest rates offered by many lenders will not likely be advantageous to you. However, you should still compare loans to ensure you receive a fair deal. You may want to consult a mortgage broker if you are not confident in your abilities.

  • Loan-to-Value Ratio (LVR)

For loans with a five per cent deposit, borrowers must pay for Lenders Mortgage Insurance. This protects the lender if the borrower cannot repay the loan.

  • Eligibility Requirements

This means that, although you may still be able to get a loan after bankruptcy, the process may be more difficult, and the terms may not be as favourable. 

  • Fees 

If you go bankrupt, you may have to pay more fees for your mortgage, as banks are less likely to waive fees or offer them at a low cost.


There are a few key things to remember if you are looking to get a home loan after bankruptcy. First, you must ensure that your bankruptcy has been discharged for at least two years. Secondly, you will need to rebuild your credit score to qualify for a loan. And finally, you will need to save up for a deposit.

Wealthy You is an Australian Mortgage Company servicing Sydney for almost a decade, offering a variety of mortgage solutions to meet the specific financial needs of every client. As an alternative lending specialist, we can make refinancing your home simple. If you want to gain access to the best home loans in Sydney, get in touch with us! We look forward to meeting you.