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Getting a mortgage after bankruptcy

Find out what your options are for getting a mortgage after bankruptcy.

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Some lenders will approve applicants with a bad credit history

If you’ve been made bankrupt in the past, it can be difficult to imagine the possibility of borrowing in the future. With a history of financial difficulty, banks and mortgage lenders will be more hesitant to lend to you than someone with a perfect credit score, so it may be harder to get a mortgage. But hard does not mean impossible! The good news is that there are steps you can take to improve your situation and give your mortgage application a better chance.

Can I get a mortgage after bankruptcy?

Yes, you can. It is certainly possible to get a mortgage after bankruptcy. It will be more difficult because many of the main banks won’t give you a mortgage if you have recently filed for bankruptcy, but there are specialist lenders who will. So while a standard mortgage deal may not be an option for you, there are alternatives. If you have been declared bankrupt in the past, you might be concerned and confused about what’s available to you. By speaking to a mortgage expert, you can get advice on the options available as well as access to specialist lenders so that you can feel more confident in your options.

Which banks lend to discharged bankrupts?

Unfortunately, there is no specific list of lenders who will lend to ex-bankrupts. Many of the high-street names won’t lend to those who have been bankrupt, but there are specialist mortgage lenders who will. This is usually viewed on a case-by-case basis and lenders will look at a range of factors including your income, expenses, credit history and overall affordability. Mortgage brokers have great relationships with specialist lenders and are best placed to advise on which lender is best suited to you and your financial situation.

What deposit do I need if I was previously bankrupt?

Lenders will demand a larger deposit from you if bankruptcy is still showing on your credit history. This is because you’re seen as higher risk than a buyer with a good credit history. It is a good idea to think about how large a deposit you can save up for and how quickly you can do it, as this may help your mortgage application. The deposit you will need will vary depending on the lender but it will also depend on your situation. If you have been discharged from bankruptcy for less than a year, you are likely to need a deposit of 40%. If it has been one year, the deposit needed ranges from 25 to 30%. After two years this lowers to 15-20% and after three or more years this becomes 5-10%. In practice, this means that if you were looking at a property worth £250,000, you would need to pay a deposit anywhere between £12,500 and £100,000. This doesn’t include expenses, fees and stamp duty costs that are involved in buying a home. So consider how long you have been discharged, how quickly you can save, and all the extra costs that will occur in the process.

How soon after a bankruptcy can I apply for a mortgage?

You can apply for a mortgage the moment you have been discharged from your bankruptcy. However, as mentioned, you will have more difficulty in getting your application approved if you have been discharged very recently. The longer you wait, the better. If you wait until you credit score has improved, and take measures to improve it in the meantime, you will have a better chance at getting a mortgage. Few lenders will consider a mortgage application as soon as you have been discharged. There are some lenders who will consider people who have been discharged for 12 months, but this will come with more restrictions and much higher criteria, such as a larger deposit and a higher interest rate. Generally, almost all lenders will consider an application after 6 years. Not only is this how long bankruptcy stays on your credit file for, but it’s also enough time for your credit score to improve if you have taken steps to boost it. This is when it may be possible to apply for a standard mortgage. To learn more about how far back lenders go when looking at your credit history, read our guide.

Will I have to pay a higher interest on my mortgage?

It all depends on how long you wait after being discharged and how much your credit score improves. You can improve your credit score by using a specialist lender and meeting your repayments on time. A standard mortgage rate deal becomes a possibility after 6 years and a stronger credit score.

Tips for getting a mortgage after bankruptcy

Think about your timing

Time heals all wounds, even financial ones. The longer you can wait after you’ve been discharged from bankruptcy to apply for a mortgage, the better your application will look to lenders. Waiting a few years will not only save you the risk of paying a larger deposit and a higher interest rate, but it also gives you time to work on that credit score.

Work on your credit score

Improving your credit score is a great way to undo some of the damage done by bankruptcy and there are many easy ways to do this. Start by checking your credit report. Is all the information in there correct? Correcting errors in your credit report can help get your score back up, as can registering to vote, paying your bills on time and in full, and reducing the amount of credit you’re using. If you’re not sure what qualifies as a ‘good’ credit score, we’ve broken it down in our guide.

Get help from a mortgage broker

Navigating a mortgage application after bankruptcy can be tricky, but there is no one better placed to help and advise you than a mortgage broker. They can understand your personal financial situation, they know the market, and they can judge which lender is best for you. Speak to a mortgage advisor today to give your mortgage application a fighting chance.

Save for a bigger deposit

It’s wise to save for a bigger deposit when applying for a mortgage after bankruptcy. By saving for a bigger deposit, you’re asking to borrow less money and opening doors to mortgage deals with better interest rates. In the eyes of the lender, this makes you less high-risk. This especially applies if you have only been discharged recently.

Clear up any debts

If you have any outstanding debts, pay them off as soon as you can. This will give lenders the confidence that you will be able to make repayments without any problems. Here’s an expert tip from Chris Schutrups, Founder of UK Mortgage Finder Our customers often think bankruptcy will stop them from getting a mortgage. This is not the case, but it is important that they disclose their bankruptcy at all times – even if it’s off their credit file. Solicitors will do a bankruptcy check on completion and some lenders simply won’t lend to bankrupts, no matter the circumstances. But we do have lenders who will consider people who have been bankrupt, even just after six months. It all depends on their individual circumstances and their deposit. The higher the deposit, the higher their chance of being approved. So bankruptcy isn’t an issue, it’s all about knowing the right lenders and how to present an application to them. At UK Mortgage Finder , we understand the stress that comes with a bad credit history. We know that the options seem limited and it can feel daunting to ask for help. But there are many reasons a person might fall into bad credit and it shouldn’t mean you have a big red cross on your file forever. Nor should it stop you from getting a mortgage and buying your own home. By working with a mortgage broker who can guide you through the process and give you access to specialist lenders, you can feel more confident in your future and take steps to improve your chances. Get in touch with us today and speak to a member of our team for expert advice.

FAQs about mortgage after bankruptcy

How does bankruptcy affect your credit score?

Bankruptcy will result in a drop in your credit score and can stay on your report for 6 years.

Can I apply for a mortgage if I’m still bankrupt?

No. Unfortunately, you can only apply for a mortgage after you’re discharged from bankruptcy.

Do I need to tell lenders I’ve been bankrupt after the 6 years?

Yes. Even after you’re discharged from bankruptcy, your name will still be on the National Hunter bankruptcy database which lenders can see, so it is important to be honest with lenders from the start.

How can I ensure that I am in the best position to secure a new mortgage after experiencing bankruptcy?

The good news is that there are several things that you can do personally to give yourself the best possible chance of securing approval for a new mortgage in the future.

All potential homeowners should be checking their credit reports regularly. Lenders use 3 credit reference agencies: Equifax, Call Credit, and Experian. The information held by each agency can vary so it is paramount that you check each one and correct any errors that could prevent you from obtaining a mortgage. Our brokers have seen many borrowers whose credit files do not contain accurate discharge or settlement dates. The main reason for this is an error on the part of the credit reference agency and can result in eligible borrowers having their mortgage applications denied by lenders because it looks as though there are new defaults and/or outstanding balances. Don’t let this easily fixable problem prevent you from securing a mortgage on your dream property.

Discussing your options with an experienced professional can help to put your mind at ease and devise an action plan to help you to obtain the right mortgage for you at the right time. They will be able to tell you whether you qualify for a mortgage in your current circumstances and advise you as to any changes you should make to boost your eligibility.

If your advisor informs you that you are not currently eligible for a new mortgage, don’t be disheartened. They will also provide you with the information you need to improve your credit score and ensure you know exactly what you need to do to qualify as soon as possible.

Remember, every year that passes makes your past bankruptcy experiences less relevant and this means that you will be offered more competitive terms, rates and fees by your future lender. It can be frustrating to have to wait, but using this time to improve the health of your credit file will help you to secure a good deal in the future.

Saving for a deposit on a home is difficult at the best of times but offering a more substantial figure up front can improve your chances of being approved by your lender. The chances of most people being approved for a mortgage after being discharged from bankruptcy for just 1 year are slim, however, if you were to meet your lender’s criteria and had a 40% deposit, you could very well find yourself in a position to secure a 60% mortgage and purchase your new home.

As most lenders will view you as a risk, they will want to protect themselves by securing a higher return on the figure you have borrowed from them. Expecting higher interest rates and factoring them into your affordability calculations will prevent any disappointment further into your application journey.

If you have any open credit accounts that you no longer use, work to close them as soon as possible. In addition to looking into how much money you currently owe to creditors, lenders might also take into account how much credit you have available to you. Lenders will typically prefer to see a smaller number of well-managed credit accounts over many active, yet unused accounts.

The Hunters Report

If you were discharged more than 6 years ago, there should be no trace of previous credit issues on your file. Importantly, however, this does not mean that you can apply for a new mortgage with any lender. You might pass initial credit tests with ease but you could still be declined following the submission of a full application because of something called the Hunters Report.

The Hunters Report is a database containing the details of everyone that has experienced bankruptcy in the UK. This list includes individuals who have been discharged for more than 6 years. This report is checked by lenders but it generally isn’t taken into account during the preliminary credit scoring process. This means that post-bankruptcy applicants can be initially accepted for a new mortgage before being declined as additional credit checks highlight their past bankruptcy issues.

This can be extremely frustrating, which is why it is important that all potential borrowers who have a history of bankruptcy are aware of this database before they submit a full mortgage application. Remember, there are still lenders who will consider your application despite your past issues with bankruptcy so it is not necessarily something to worry about.

The impact post-bankruptcy credit issues can have on new mortgage applications

Any credit issues that occurred before your bankruptcy, including mortgage arrears, CCJs, defaults, missed payments and debt management plans will be considered as settled. Your credit file will essentially be reset from the day of your bankruptcy and after being discharged you will be able to begin to rebuild your credit file from the ground up.

If you have experienced credit problems after your bankruptcy, you might run into some additional problems when trying to obtain new credit. If you have been declared bankrupt in the past, lenders will already view you as a higher risk borrower than someone who has not experienced the same issues with credit. Although there are lenders willing to lend to discharged bankrupts, most will specify a requirement for a clean post-bankruptcy credit file.

The nature of any new credit problems will determine how large an effect they might have on the outcome of any future mortgage application. Although it is true that many lenders will immediately decline applicants with new credit issues post-bankruptcy, there are some who will still lend depending on the circumstances. The best course of action here is to obtain advice from a specialised broker who will discuss your situation with you in depth and develop the most appropriate action plan to help you to secure the best deal.

Which lenders currently accept mortgage applications from discharged bankrupts?

There are approximately 20 different lenders who will consider applications from discharged bankrupts. Some of these are mainstream lenders and some provide more specialist services and products for individuals with more complex credit histories. As every lender and every prospective borrower is different, without understanding your particular circumstances it is impossible for us to say whether you would meet the eligibility criteria of some or all of these 20 lenders.

Will I be eligible for a buy to let mortgage post-bankruptcy?

The short answer is that yes, it is possible to secure a buy to let mortgage if you have been made bankrupt in the past but your personal eligibility will be dependent on your current circumstances. Most lenders will only consider applicants who:

You should be able to demonstrate that you are receiving regular funds of at least £25,000 per annum from employment, self-employment or a pension.

Can I use equity in my home to repay bankruptcy debt?

Repaying bankruptcy debt can eliminate it from your credit record completely, provided that it is done within a set timeframe and in the correct way. This process is officially known as an annulment and can give people the opportunity to settle their debts and move forward with their lives.

Depending on the circumstances surrounding your bankruptcy, you might find this process difficult to navigate. There are, however, lenders who will facilitate refinancing for the purpose of settling debts and this process would allow you to progress through the process of remortgaging at a later date with a clean, bankruptcy-free credit file.

If you are currently in this situation, you will likely find it valuable to contact one of our specialist mortgage brokers to discuss your circumstances and the options available to you.

Be careful with credit applications

After bankruptcy, it is important to avoid making too many successive credit applications, even if they are for different products. Doing so could negatively impact your credit score and communicate to potential lenders that you are relying too heavily on credit to make ends meet. If you have been considering making multiple applications to identify and obtain the best possible deal available to you, utilising the expertise of a mortgage broker will ensure that your applications are strong and that you are sending them to lenders who are likely to approve you.

If your circumstances and credit file are not currently conducive to securing a mortgage, don’t give up on your desire to own your own home. Understanding the steps that you need to take next will help you to ensure that you are in the best possible position to secure the right mortgage for you, at a rate that you can reasonably afford, as soon as possible.

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