Home loans still possible after no-asset procedure

Tuesday, 25 September 2018

No-asset procedure is an option when debt gets out of control.

I have previously been through NAP (no-asset procedure) and took full advantage of having a clean slate to absolutely turn my finances around. However, I am now stuck. I cannot see or find any information anywhere on what steps I am best to do to make my way to a home mortgage, I'm assuming banks will be able to pull up the information I previously been through NAP, how will this affect my application? Am I legally obligated to tick the box when asked if I have been made bankrupt or NAP? I do not have any outsiders' help, I need to be able to get myself over the home ownership line by myself and I'm prepared to do what it takes……but what does it take? There is no help advice anywhere.

A no-asset procedure is like bankruptcy in that it wipes debts when someone gets into strife and cannot pay. It is used when total debt is under $47,000, and the person has no assets and no ability to make repayments. It can only be used once.

Mortgage adviser John Bolton, of Squirrel, says your NAP will show on your credit record for five years, but after that, you will be clear.

But if you had bank loans written off as part of your NAP, that lender will not view an application for a home loan favourably.

'She should focus her efforts on banks that she didn't have a bad relationship with. Get in early and build a strong history of good account conduct and saving.'

A spokesman for the NZ Bankers' Association agreed building a relationship was important.

'Banks will look at your willingness to repay a loan, and your ability to do so. If you've been bankrupt before, it will help to rebuild a good credit history that demonstrates your willingness to repay. That may mean starting with a small overdraft or perhaps a credit card. If you show you can keep up repayments your bank may work with you on something bigger, like a home loan.'

Another adviser, Glen McLeod, said the amount of time that passed between the NAP and the home loan application, the better.

If you have any personal finance or consumer questions, email susan.edmunds@stuff.co.nz