How Does Bankruptcy Affect Mortgage

Bankruptcy is a process where an debtor is declared insolvent by the court. His debts are written off and he can try for a fresh start in life. The question is whether an individual who has been declared bankrupt can get a loan again to buy a house. This is bankruptcy mortgage. The possibility of a borrower getting a mortgage after bankruptcy is akin to a borrower getting a loan after bed credit. The answer to this question is affirmative. Thus in a nut shell bankruptcy mortgage is definitely possible.

Many mortgage lenders are in the financial market. They are not only willing to help in your mortgage , but in a matter of fact way help borrowers who have low credit scores as well and have filed Chapter 7 bankruptcy, Chapter 11 bankruptcy or Chapter 13 bankruptcy.

The process has been made simpler with the emergence of online lenders who advertise on the net.

Instead of having to contact different lenders for a loan as was the case earlier the advent of the net allows the mortgager to straightaway match a number of lenders and compare their rates. Bankruptcy mortgages are of two types. They are fixed rate mortgage or adjustable rate mortgage. In the case of fixed rate mortgage the rate of interest remains fixed (or constant) for the duration of the loan. Both forms of bankruptcy mortgage have their advantages and disadvantages. In a fixed rate bankruptcy the interest does not change and the mortgager will be able to easily budget his monthly payment since the installment will never vary. The disadvantage is that sometimes a lender will charge rates that are higher than the current rate. Also, there are often penalties for prepaying the loan, which is what happens if you should ever decide to refinance your loan.

In contrast a variable rate mortgage the rate of interest will fluctuate during the term of the loan. The advantage of this bankruptcy mortgage is best understood as follows. The volatility of the interest rate can cut you both ways. If the current rate is high (relative to what you could have got with a lower fixed-rate), your monthly mortgage payment will be higher; the opposite holds true as well. A lower interest will lower your monthly installment. However one big advantage of a variable interest rate bankruptcy mortgage is that they do not have prepayment penalties. This is quite beneficial if you should ever decide to refinance your mortgage.

The disadvantage is clear.With unpredictability of rates can either be an advantage or disadvantage, depending entirely on what you are paying versus what you could have been paying if you had a fixed-rate mortgage.

In a bankruptcy mortgage few salient points may be borne in mind. Firstly the more money that you put down, the lower your principal will be, and ultimately, the less you’ll pay in interest. A 20-percent down payment is an ideal amount; however, it is not a rule. You can still become a home owner if you want to put more—or less—down on the home.

Also Mortgage loan or the length of the loan is typically between 10–30 years long. Usually, the longer the loan, the more you’ll pay in interest, although you’ll have lower monthly mortgage payments.

Likewise, the shorter the loan, the less you’ll pay in interest. Your interest rate—along with the principal and term—will be significantly impacted by your credit score… When a borrower misses a significant number of mortgage payments , the lender may chose to foreclose the home. Which means repossess or sell it.

Mortgage lenders usually consider a mortgage to be in default when payments are not received for a period of 3 three months.

When a mortgage loan is in default, the mortgage lender can start the foreclosure proceedings of the property. So be on your guard. But the good news remains. Bankruptcy mortgage is not out of reach and there is light at the end of the tunnel.