Mortgages after bankruptcy
Can I get a mortgage after bankruptcy?
Getting a mortgage after bankruptcy is possible, however it can be a difficult process. This is because there are many factors that lenders consider when assessing an application after a bankruptcy.
This includes the amount of equity or deposit you have, when you declared bankruptcy and when it was discharged, and your credit use in the intervening time. Each lender will look at your finances as a whole, but equally each will have their own criteria to meet.
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What we cover in this guide
- Why is it difficult to get a mortgage after bankruptcy?
- Try our bad credit mortgage calculator
- Getting a mortgage after bankruptcy
- Which banks lend to discharged bankrupts?
- Finding the best mortgage rates for discharged bankrupts
- Remortgaging after bankruptcy
- How do I improve my chances of getting a mortgage after bankruptcy?
- Frequently asked questions
Why is it difficult to get a mortgage after Bankruptcy?
Lenders make decisions on whether to grant a mortgage application based on their perceived risk. When they assess a mortgage application, they will look into your credit history, as well as your current circumstances.
If a lender sees bankruptcy on your credit file, they may think you’ll be a high risk in future and decline your application. Some lenders are willing to consider mortgages for people with a record of bankruptcy. But, even so, they may still place restrictions on the level of borrowing and impose higher deposits and interest rates.
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- A guide to bank statements for mortgage applications
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- Try the mortgage affordability calculator
Getting a mortgage after bankruptcy
Many lenders, particularly those on the high street, will simply decline an applicant with a history of bankruptcy. But there is still a fair amount of choice on the market, with specialist lenders filling the gap left by high street lenders.
The biggest factor to influence a lender’s decision will be the date of the bankruptcy. As a rule remember that the longer amount of time since the bankruptcy occurred, the better.
How long after bankruptcy can I get a mortgage?
After six years have passed nearly all lenders will consider a mortgage application. After 3 years, there is still a decent amount of choices available.
It becomes more difficult if it has been just twelve months since the bankruptcy was discharged. But, there are some lenders who are prepared to offer a mortgage on the first day. Although you may need to find a larger deposit, accept higher interest rates and have taken steps to rebuild your credit score.
The figures below give you an idea of the minimum deposit or amount of equity required compared to the amount of time that has elapsed (correct at the time of writing).
| 6 years | 5% deposit |
| 4-5 years | 10%, or possibly 5% |
| 3-4 years | 15%, or possibly 5% |
| 2-3 years | 15% |
| 1-2 years | 25% |
| Day one | 50% |
Which banks lend to discharged bankrupts?
As mentioned, many high street lenders will shy away or even not work with individuals who’ve declared bankruptcy. This means you will need to seek the services of a specialist lender.
These lenders aren’t always open to the general public, but instead you’ll likely need to use a mortgage broker to access them. As every application is different, and the market is forever changing, it’s difficult to list every lender available.
If you want to get an accurate idea of who might be best suited to your circumstances, get in touch today!
Finding the best mortgage rates for discharged bankrupts
It’s impossible to list a ‘top ten’ of products with the most attractive rates here, as the mortgage market is highly competitive and constantly shifting. This means what might be the most favourable rate today is unlikely to be the case next week.
However it’s also worth noting that the interest rate is only one aspect of the mortgage. Considering all aspects of a deal is key to finding the right scheme for you.
Rates charged will vary from lender to lender and also according to your own individual circumstances. Things such as the amount of deposit you can provide, and the time elapsed since the discharge will influence the rate you’re offered. Essentially, the higher your deposit and more time that has passed, the more chance you have of obtaining a better rate.
Although, it’s important to realise that the product with the lowest interest rate might not work out as the most cost-effective. Mortgages with lower rates tend to also come with higher associated fees. Some even carry quite strict terms for extra payments if you wanted to switch your mortgage in the future.
To increase your chances of obtaining a competitive rate, why not reach out today. Our expert team of advisors are on hand to guide you through the whole process.
Remortgaging after bankruptcy
Can I remortgage after bankruptcy?
Similarly to finding a normal mortgage, the same criteria will apply when looking to remortgage your current property. While you’re still within a bankruptcy period, it’s unlikely that a lender will consider you.
After your bankruptcy is discharged, it’s possible to remortgage, but your options could be restricted according to a few factors. At the time of writing, there are certain lenders who will confirm a mortgage on the first day after discharge, but you’ll need to put down a large deposit or already have a lot of equity tied up in your current property.
Your options will become much better once twelve months have passed since your bankruptcy was discharged. If you want typical high street rates and required levels of deposit, you will need to wait around 3-4 years.
Can I remortgage to pay off my bankruptcy?
It’s a good idea to look for ways to pay off your bankruptcy as soon as possible, in what is referred to as an annulment in legal terms. Remortgaging can seem like the easy answer to this – a way to convert your equity to cash and get your bankruptcy behind you. However, you may find there are some obstacles involved
During a bankruptcy period, your ability to access any lines of credit or borrowing is likely to be severely restricted. Therefore, you’ll find that lenders across the board will be unwilling to consider your remortgage application.
One option could be to approach a specialist ‘second charge’ lender, however their products can require expert knowledge to navigate. To add to this, they usually come with high fees and interest rates. These lenders are usually only accessible through a specialist broker too.
After your bankruptcy is discharged, your situation starts to become easier. This means it’s possible to remortgage to release funds to pay off your debts within a day of the discharge.
This said, your options will still be limited as the bankruptcy will still show on your credit file. Therefore, it’s likely that you’ll require a good amount of equity tied up in your current property. Ideally you would need a minimum of 50% equity in your home to remortgage immediately after being discharged.
How do I improve my chances of getting a mortgage after bankruptcy?
With a bankruptcy event on your credit history, many lenders will view this as a major red flag. As mentioned you will not be able to get a mortgage during the actual bankruptcy period.
However, don’t worry, there are a few actions you can take so you’re ready for when you want to apply again:
- Allow time to pass – don’t rush straight into a new mortgage as soon as you think you’re eligible again.
- Take steps to improve your credit rating.
- Reduce any other debts you have.
- Show engagement with your finances.
- Supply a large deposit.
- Get expert advice.
Talking to an expert specialist mortgage broker with many years’ experience, will put you in a far stronger position. They will be able to advise you along the way, ensuring you are ready when you come to apply.
Frequently asked questions
- Can a discharged bankrupt obtain a Buy-to-Let mortgage?
Buy-to-Let mortgages and bad credit mortgages are both in themselves specialist areas within the mortgages sector. If you’re in a situation where you are trying to combine the two, then you might expect to come up against some issues.
However, you will not necessarily face double the amount of problems. In fact, your journey to a successful mortgage might be made easier. This is due to you almost certainly needing to work with a specialist mortgage broker in all the arrangements.
When assessing your suitability for the loan, lenders will place less emphasis on your personal income and finances. And instead they will focus far more importance on the anticipated rental revenue from the property.
A standard requirement of most Buy-to-Let mortgages is a larger than average deposit. When you add to this a discharged bankrupt, you will need to provide even more than usual. Typically you’ll be required to put down at least 25–30% of the property’s value up front.
Lenders will also be more likely to accept your application if you’ve managed to keep a spotless credit record since your bankruptcy was discharged.
If you’re looking to obtain a Buy-to-Let mortgage following a bankruptcy, get in touch today. Our advisors can assess your circumstances and do their best to pair you with the correct specialist lender.
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