How Does Having a Part IX in Place Affect a Mortgage Application?
Sometimes, financial obligations can get away from you. And if things get really tough, your financial advisor may steer you towards a Part IX agreement to help prevent your creditors forcing you into full bankruptcy. While a Part IX can be a preferable alternative to bankruptcy, it can affect any future applications for finance – including home loans.
The extent to which a Part IX affects an application depends on many factors, including your wider financial and personal circumstances. However, a key determining factor is whether your Part IX agreement is discharged or still in effect.
Applying for a mortgage with a Part IX in place
There is no law against applying for new finance if you have a Part IX in place. It’s just not that great an idea.
That’s because, although it’s not full bankruptcy, a Part IX agreement is still considered an ‘act of bankruptcy’. And as per the Bankruptcy Act 1966, any act of bankruptcy gets listed on your credit file. Mortgage lenders, banks and other financial institutions then use the information on your credit file to help them assess your home loan application. If they can see there is a Part IX on there that’s still in effect (i.e. you’re still paying off your creditors), it tells them two things:
- You’ve had problems meeting your financial commitments in the past
- Your outgoings are probably already substantial as you’re making repayments to creditors
Think of it in terms of a friend asking you for money. Would you lend them cash if you knew they were still paying back money they’d failed to repay in the past? Or would you protect yourself and say no? That’s pretty much the same logic financial institutions apply to mortgage applicants with Part IXs listed on their files.
This can make getting finance difficult – but not impossible. Your credit history is just one factor in the equation; mortgage lenders will also look at a range of other financial and personal circumstances when assessing your home loan application.
Your credit history is just one factor in the equation – mortgage lenders will also look at a range of other financial and personal circumstances when assessing your home loan application.
Rapid Finance specialises in bad credit home loans. So if you have a Part IX in place, call us on 1300 467 274. Even if we can’t help you apply today, we’ll advise you on how to get yourself in the best financial shape for a future application.
Applying for a mortgage with a discharged Part IX
Even once you’ve paid off your debts and your Part IX is discharged, it will remain listed on your credit file for more than five years. But there is a significant difference between a Part IX that’s listed as current and one that’s listed as discharged.
While the high street banks may still turn you away, you’ll find that there may now be a number of lenders who’ll consider your application. The trick is knowing who to approach – the worst thing you could do at this point is to lodge multiple applications with lenders indiscriminately. That’s because every time you apply for finance a credit check is required and a note goes on your credit file – and too many notes in a short space of time can look suspicious. Together with that discharged Part IX, this could ruin any hopes of getting approval on a home loan.
So don’t fall at what could be the first hurdle. As bad credit home loan experts, we can use a single credit check to match you with any number of appropriate mortgage lenders.
Call Rapid Finance on 1300 467 274.