Can I get a mortgage after bankruptcy?

May 16, 2018

*Please note we help people with mortgage arrears, we do not provide mortgages*

If you are considering declaring bankruptcy there are many factors that you should take into consideration; one of which being your chances of getting a mortgage after bankruptcy.

Although it can be difficult to arrange any form of credit after you have been discharged from bankruptcy (and almost impossible to during your actual 12 month period of bankruptcy), it can still be possible for you to get a mortgage after bankruptcy.

How do you get a mortgage after bankruptcy?

It is usually advisable to seek the services of a specialist mortgage advisor if you are a discharged bankrupt looking to secure a mortgage. Most high street lenders and mortgage companies will refuse mortgage applications if you have ever been bankrupt (or it is under six years since you were discharged from bankruptcy), however there are a number of specialist companies known as adverse lenders who will consider lending to discharged bankrupts.

Mortgage rates for discharged bankrupts

As you might expect to cover the presumed higher risk of lending to someone who has previously been declared bankrupt adverse lenders tend to charge much higher interest rates than would be available to someone with a good credit history. Mortgages available to discharged bankrupts also tend to require higher Loan To Value rates, which generally means that you will need a larger deposit.

Finding a large deposit is often very difficult in the years following bankruptcy as in most cases you will have been left with very few assets and will find it difficult to secure further credit.

The crucial point here is time, as not only will waiting for a few years after you have been discharged form bankruptcy give you more time to save up for a deposit, but also the longer the time since your bankruptcy the more likely you are to be accepted for a mortgage and the lower deposit you will need.

As a rule of thumb to secure a mortgage:

  • 1 year after bankruptcy requires a minimum 40% deposit
  • 2 years after bankruptcy requires a minimum 25% deposit
  • 4 years after bankruptcy requires a minimum 15% deposit
  • 6+ years after bankruptcy requires a minimum 5% deposit

Along with this mortgage rates tend to decrease the longer the time that has elapsed since you were discharged from bankruptcy.

How to improve your chances of getting a mortgage after bankruptcy

Along with the time since you have been discharged from bankruptcy affecting your chances of being approved for a mortgage, there are also a number of other factors that can affect your likelihood of acceptance.

Reason for bankruptcy

Most lenders will want to know more about the circumstances surrounding your bankruptcy. Reasons such as your business failing, illness or a messy divorce will tend to be viewed more favourably as they can be seen as one-off occurrences. However if you were declared bankrupt after amassing a large amount of debt which you knew that you were unlikely to be able to service, this is likely to be regarded more negatively.

Conduct since bankruptcy

If in the period since bankruptcy you have proved that you are trying to regain a firm financial footing, only applying for necessary and sensible credit which you are paying off regularly, this is likely to increase your chances of being accepted for a mortgage. However if your credit record shows continued misuse of credit or that you are applying for large amounts of credit on a regular basis, this is likely to negatively affect your application.

Check your credit records

Once you have been discharged from bankruptcy it is important to check your credit records with all three UK credit reference agencies (Experian, Equifax and Callcredit). Ensure that any defaults or outstanding balances etc. from before your bankruptcy have been removed and the information held by each agency is correct and matches each other.

If you are considering bankruptcy in Northern Ireland, contact the friendly experts at Northern Ireland Debt Solutions on 0800 470 0461. We will talk you through your options surrounding bankruptcy, ensuring that you are fully informed of all of the potential ramifications before supporting you though the entire bankruptcy process.

Lawrence O'Hara

Insolvency Adviser

Tel: 028 2132 6269

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