Mortgages after bankruptcy including options after discharge
You can still get a mortgage depending on how long ago the bankruptcy occurred. More than likely you will have to speak to a specialist lender rather than going through the high street.
Your credit record stretches back six years so any debts and bankruptcy recorded on it will no longer be visible to lenders after this time. However, you may still be asked whether you’ve ever been bankrupt, which means it could still affect your chances of getting a mortgage.
What's in this guide?
Speak to a specialist lender
If you are struggling to get a mortgage via the traditional methods you could speak to a specialist lender. They can provide the expertise on a particular area of lending where you’re looking for assistance.
How soon after bankruptcy can you get a mortgage?
If you already own a home it’s also possible to borrow against any equity to clear the debts but it may be tricky to find a willing lender.
Once a year has passed you will be discharged from the bankruptcy and most of any remaining debts will be written off, although any assets you had can still be used to pay them off at this stage.
You won’t automatically get any proof of discharge so you should email the Insolvency Service to ask for a confirmation letter. You’ll also need a certificate of discharge to apply for a mortgage – you can get this through the court if you applied for bankruptcy this way or by emailing the Insolvency Service if you applied for it online.
The credit reference agencies won’t be told directly that your bankruptcy has ended so you should get copies of your credit reports from the three major agencies (Callcredit, Equifax and Experian) and ask them to add this information if it’s not there. Also make sure everything else recorded on your reports is accurate.
What size deposit do you need?
To apply for a mortgage just one year after bankruptcy (as soon as you are discharged) you’ll need a minimum deposit of 40% but your chances of being granted one at this stage are small.
Once you are 2 or 3 years from bankruptcy this could fall to 25% and then to 15% when you are 4 years away, when you will be much more likely to be granted a mortgage. You may also be able to get a buy-to-let mortgage then.
After 5 or 6 years your chances increase even further and you may be able to get a mortgage with a 10% deposit, or possibly even 5% at 6 years. Once more than 6 years have passed, getting a mortgage with a 5% deposit is even more likely.
As with any mortgage application, affordability will be assessed, so any payments you are making towards remaining debts will be taken into account.
Which mortgage lenders will lend to you?
It’s best to get advice from a mortgage broker who can look at the whole market and apply to the lenders more likely to lend to you.
Being turned down won’t hurt your credit score in itself as it won’t be recorded on your credit report but making multiple applications for credit in a short space of time can. This is because every credit check made by a lender when you apply (known as a hard search) is recorded and applying for lots of credit can make lenders think you are in financial difficulty.
Remortgaging after bankruptcy
When you become bankrupt you have to hand over your assets to the person appointed to manage your bankruptcy – known as your trustee – and if you own a home it may have to be sold to pay off your debts.
You can delay this for a year if you have less than £1,000 in equity, you have children or a partner living with you, or someone else, like your partner, can buy the equity or legal title of the property from you. If the trustee hasn’t sold your home after three years and the equity is still less than £1,000 it will be returned to you.
If you don’t lose your home and want to remortgage, the same situation is likely to apply as with purchase mortgages.
Improving your chances of being approved for a mortgage after bankruptcy
There are a number of ways by which you can improve your chances of success when applying for a mortgage post-bankruptcy.
- Using a mortgage broker can be helpful as they have access to all lenders on the market – they can deal with them directly and you may get a better deal as a result. They’ll also know which lenders will be most amenable to your situation and will go to them first, saving you time and potential rejections.
- It’s also worth considering specialist mortgage lenders. These are lenders that specialise in lending to borrowers with a poor credit rating or that have a history of bad credit.
- You could also offer a higher deposit, though overall improving your credit score is probably more worthwhile.
- Waiting until the bankruptcy has been removed from your credit report will be beneficial, as will making an effort to improve your credit rating.
Improving your credit rating
After bankruptcy you will have to build up your credit rating from scratch. By taking out small amounts of credit and paying them off on time you can show lenders you are creditworthy. The more time you do this for, the better your chances. Lenders will also be less sympathetic about any credit problems after bankruptcy so it’s really important to maintain a clean slate.
More guides on Finder
Limited company loans
See how to get a business loan as a limited company in the UK, and how much you can borrow.
Sole trader loans
Find out how to get a loan if you work for yourself, including which lenders offer business loans for sole traders.
Getting a 5% deposit mortgage under the government’s new guarantee scheme
Learn more about the new government scheme that allows first-time buyers and home movers to get on the property ladder.
Chain break finance
Learn everything you need to know about chain break finance – a type of bridging loan that stops you losing your dream home if the sale of your existing one falls through.
Commercial bridging loan
Everything you need to know about commercial bridging loans. We look at when they’re useful, how they work and what to be aware of before taking one out.
Hard money loans: Short-term finance in the UK
Learn everything you need to know about hard money loans – also known as bridging loans. Find out how they work, what they can be used for and their benefits and downsides.
100% bridging loans: How to get one
Read our in-depth guide to 100% bridging loans, including how bridging loans work, how to borrow 100% of the property’s value, how to get the best deal and the pros and cons.
Loans for small businesses affected by coronavirus
Learn about government support and alternative options for businesses needing finance to help deal with the impact of coronavirus.
Molo Finance mortgage review
Discover whether a digital-only Molo Finance mortgage could be suitable for you.
Compare bridging loan rates for property development
Everything you need to know about the benefits of using a bridging loan to fund a property development project if you don’t have the cash already available.
Ask an Expert