Can I get a mortgage After Bankruptcy? | Bad Credit Mortgages
How do I increase my chances of being approved for a mortgage after bankruptcy?
Getting a mortgage after bankruptcy can be difficult but not impossible, with many highstreet lenders declining applications with previous bankruptcy. Our specialist brokers and the lenders they work with believe that everyone deserves consideration, and could help you find a mortgage even after bankruptcy.
Some lenders will consider your mortgage application immediately after you’re discharged. Others might require you to have been discharged for at least 12 months, if not for several years. The main issue facing borrowers is their deposit amount. The longer since your discharge, the more likely a lender will be to accept you for a higher Loan to Value (LTV) product.
Speak to us today about your situation and we can advise on the right path for you.
How to get a mortgage after bankruptcy?
If you’ve been bankrupt in the past, it’s likely you’ll struggle to find a mortgage with a highstreet lender.
Luckily there are plenty of specialist lenders that will consider applicants who’ve faced bankruptcy, and our brokers at Clever Mortgages could help you access these lenders.
Getting a mortgage after being made bankrupt is certainly possible, and there are a few things you can do to give yourself the best chance.
Speaking to a broker, such as Clever Mortgages who have experience in dealing with mortgages after bankrupcy can help your chances of approval. We have relationships with lenders most likely to say yes.
Save up a large deposit:
The biggest factor in getting a mortgage after being discharged from bankruptcy is the size of your deposit. Your bankruptcy will play a large part in how you are viewed financially and having a larger deposit will help lenders view you as a lower risk, you’re more likely to be accepted for a lower LTV mortgage so saving up a fair portion of the property’s value will help increase your chances for approval.
Having a stable income, or consistent employment in the same field helps boost your application and make you a more attractive borrower. Potential lenders will want to know you have the income needed to afford mortgage repayments.
Some specialist lenders might consider your mortgage application immediately after you’re discharged from bankruptcy. Others might prefer you to have been discharged for at least 12 months or for several years.
The main issue facing borrowers is their deposit amount. The more time that has passed since your discharge, the more likely a lender will be to accept you for a higher Loan to Value (LTV) product. If you’ve been discharged bankrupt for a year or less, a lender may need you to supply a deposit of at least 50%. After 2 or 3 years, provided you can prove good money management, this could drop to 25% LTV. When you have been discharged for over 6 years, you could become eligible for 95% mortgages.
Bankruptcy is a legal proceeding involving an individual who is unable to repay their debts. It allows those who have no way of repaying their debts to start fresh and – depending on assets owned – sometimes allows creditors to reclaim some of the money owed.
It costs £680 to apply for bankruptcy, and you can only do it online. Apply for bankruptcy
The GOV.UK website advises:
“You’ll need to provide information about your income, outgoings and debts, including:
benefits or pension statements
bills – for example, electricity, credit card and council tax
letters from a bailiff or enforcement agent
You cannot submit your application until you’ve paid the full fee. You can pay in instalments if you cannot afford to pay it all at once. If you are struggling to pay the fee, contact a debt adviser about charities that may be able to help.”
There are three reasons that can allow a person to become bankrupt:
you can’t afford to repay your debts and want to declare bankruptcy
you owe your creditors £5000 or more and they wish to apply for bankruptcy on your behalf
you’ve broken the terms of an individual voluntary agreement (IVA) and your insolvency practitioner has applied for your bankruptcy
If your application, or your creditors application on your behalf, for bankruptcy is accepted then your assets would no longer be considered yours and your bank or building society account(s) would be frozen. There are exempt goods, like everyday household items and things you need to work, such as your computer or car.
Someone will be appointed to manage your bankruptcy, either an official receiver (an officer of the court) or an insolvency practitioner. This person will be your “trustee” and will handle your assets and bank accounts.
Your assets could be sold to help your creditors reclaim some of the money you owe. You might also need to make monthly repayments from spare income, but only if you can afford to do so. If your trustee decided you can afford it, this could become an Income Payments Agreement (IPA) and can last for up to 3 years.
While you’re in a bankruptcy order, there will be restrictions you need to follow. You cannot:
take out more than £500 in credit without declaring your bankruptcy
direct a company without court permission
create, manage or promote a company without permission
manage a business with a different name without declaring your bankruptcy
A bankruptcy order usually lasts a year, after which you should be discharged. This would give you a fresh start, effectively meaning would no longer owe the debts included in your order and your creditors won’t be able to chase the money you owed.
You’ll still need to pay any debts not included in your bankruptcy order, such as student loans but outside of that you should be free from the debt and the restrictions associated with a bankruptcy order should be lifted. This means upon discharge from bankruptcy, you’re no longer limited with the amount of credit you can access, and pursuing a mortgage is viable.
Some lenders may consider you soon after being discharged from bankruptcy, but others will need to see a period of responsible money management. You can improve your credit rating by:
This makes it easier for lenders to confirm your identity, as they want to check that you live where you say you do. It only takes around 5 minutes to make your electoral roll application and you can do so here.
It may sound obvious, but keeping up your payments helps your credit score. You may think that having missed payments in the past the damage has been done. However, missed payments have less impact as time goes on, so provided you keep on top of your current ones it should help your score.