Mortgage After Bankruptcy

Podcast approved by The Openwork Partnership on 18/10/2024

Can I get a mortgage after bankruptcy? How long after bankruptcy can you get a mortgage?

Yes, you could. Bankruptcies normally last for 12 months or so. The earliest point you could look to apply is after those 12 months have passed and you’ve been discharged from bankruptcy.

Many lenders want three to six years to have passed to consider you for a mortgage. It all depends on your credit history since bankruptcy, the lenders’ criteria and how much deposit you could offer.

What types of mortgage can you apply for after bankruptcy?

There are adverse and subprime lenders that would consider you fairly soon after a bankruptcy has ended. Then you’ve got high street mortgages which will accept you typically after six years.

You could access guarantor mortgages, and Right to Buy mortgages, so there are a few different options after bankruptcy to obtain a mortgage.

What eligibility criteria do I need to meet to get a mortgage after bankruptcy?

Generally, you need three years – that will open up a wide range of lenders. The longer you wait, the better your chances are going to be.

That’s because your credit will have been building up – as long as you keep on top of any new credit you’ve obtained since.

The deposit is important, too. You could potentially get a mortgage with a 5% or 10% deposit, but if you could reach 20% to 30% you’ve got a better chance of being accepted. You will need to be in stable employment or if you’re self-employed, to have had a steady income over a number of years.

Ideally, your debt to income ratio should be relatively low. This is the amount of debt you’ve got outstanding versus your income. Lenders will want to make sure you’re not going to get back into the same position as before.

How much can I borrow on a mortgage after bankruptcy?

You could borrow four to five times income, and with some lenders, up to six times. Again, it depends on your outgoings and commitments, which may reduce the overall amount.

Will I pay a higher rate of interest on my mortgage after bankruptcy?

Potentially, yes. It depends how soon you’re looking to apply. If you apply within the first six years, it may mean you’ll pay a higher interest rate. After six years, you may get a mortgage with a high street lender at the same rates as anybody else.

Trying to improve your credit once the bankruptcy’s ended could give you a better chance of getting a cheaper interest rate.

How do you apply for a mortgage after bankruptcy?

Rebuilding your credit is the first step. This includes making payments on time, reducing debt, and perhaps using a credit builder card or small loans. Obviously, if you’re taking out credit to build your score, you’ve got to be responsible with it.

It helps to save for a larger deposit of 20% to 30%. Speak to a mortgage broker and let them have a look at your credit file. They will point you in the right direction and give you a roadmap for when may be the right time to apply.

Get all your documents in order – make sure your name’s and address are correct with your bank and just put yourself in the right position to proceed.

How can a broker help with a mortgage after bankruptcy?

When your bankruptcy has ended, speak to a mortgage broker and we will look at the different credit files that lenders will review. The three main ones are TransUnion, Equifax and Experian.

We need to look at how your adverse credit has previously been reported, to put you in the right light for the lenders. We also have access to specialist lenders that you wouldn’t be able to access off the high streets.

We have experience in dealing with clients with previous bankruptcy and know which lenders would be more friendly to your circumstances. We may be able to negotiate a better deal than you could get yourself.

The big thing with using a mortgage broker is that it could save time and stress. You give us the documents, have a conversation with us and we go away and do all the work. We find the relevant mortgage to match your needs – and that comes back to the tailored advice.

If you explain your situation and what you’re looking to achieve, it’s our job to then get you in that position.

YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

Approved by The Openwork Partnership on 18/10/2024.