How To Secure A Home Loan Even If You Have Been In A Part 9 Debt Agreement
What Is A Part 9 Debt Agreement?
A debt agreement in general is an agreement between you and anyone you may legally owe money to. A Part 9 Debt Agreement can be reached through negotiating with your creditors. It is something you would offer, and they would decide whether to accept or not. Secured credit such as a home mortgage or automobile loan is excluded from these types of agreements. The Part 9 Debt Agreement was devised to help those with low incomes avoid bankruptcy and be able to come to an agreement with creditors to repay their debts. So if you are considering bankruptcy, you may want to take a look at this option instead.
Home Loan Options During & After A Part 9 Debt Agreement
When you enter into the agreement, you have a number of options available to you:
- You and your creditor can agree that you will pay less than the full amount of the debt.
- Your creditor may grant a moratorium on your debt.
- You may be able to use some of your property as full or partial payment of your debt.
- You and your creditor may agree upon a payment plan that you can afford to stick to.
Keep in mind though that not everyone can qualify for a Part 9 Debt Agreement. You must meet the following requirements:
- Have not been bankrupt within the last 10 years.
- Your income tax falls below the current threshold.
- Your debt falls below the current threshold.
- Your non-exempt property value falls below the current threshold.
- You are unable to pay your bills when they are due.
There are many advantages to obtaining a Part 9 Debt Agreement:
- The amounts you owe to creditors is frozen, the amount does not grow or gain interest.
- Creditors are no longer allowed to use any other remedy, such as sending you letters or calling you, to collect on the debt.
- You can take a longer amount of time to pay the debt, with payments that you can afford.
Banks have a hard time approving a loan for an applicant who had a Part 9 Debt Agreement because many lenders are naturally going to be cautious about lending money to someone who has a negative credit history. They would feel they are making a risk that you will not be able to make your mortgage payments since they see you were unable to keep up with your debts in the past.
Remember that if you enter a debt Agreement, it will show up in your credit file and lenders will see this. Most banks will only consider taking the risk of lending to you if you have a very good reason to have needed to enter into the agreement such as an illness.
If you are currently in a Part 9 Debt Agreement, very few banks are going to even consider lending to you. In addition, they will feel it is likely that all of your available funds are going towards repaying your outstanding debt as agreed upon in the agreement and do not have the means to make any additional payments. You may be able to refinance your current mortgage though, at only 80% of the value of the property, and at about 2 to 4 percent higher than the standard variable rate.
Once you have completed the agreement you will be able to get a home loan, but still at no more than 80% of the value of the property and at a few points above the standard variable rate.
Once the Part 9 Debt Agreement is no longer on your credit file, which is after seven years of completion, you will be able to get a home loan at the regular rates.
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