Insolvency affects tens of thousands of people each year and after such an event and when you are starting to move on there comes a time when the question, “Can I get a Mortgage after Bankruptcy?” arises.
The good news is, yes, it is possible to get a Mortgage once you have been discharged from your Bankruptcy. However the options vary significantly depending on the details and here I will give some insight into getting a mortgage after bankruptcy.
The stigma attached to Bankruptcy has waned a little over the last decade, following the recession in 2007/08 a lot of people were significantly hit by that and quite a few of those would have come out of it the other side with some form of adverse, around 100,000 people in 2007 alone went through the Insolvency process . That means Bankruptcy has become more common and understood than it maybe has been in the past.
The way Mortgage lenders assess your bankruptcy can differ. Some will work from the Registration date of the Bankruptcy and others will work off the discharge date. It is not a given that lenders who work off the registration date are better.
Discharged Bankruptcy Mortgage options
0-3 years after going Bankrupt
If you have been discharged from your Bankruptcy for less than 12 months, you are limited to maybe 2-3 lenders. Typically they will want a 30% deposit and rates will be in and around the 6.5% mark.
At 1-3 years discharged, your options are broadly the same as above, the only difference is that you may start to get away with a 25% deposit and/or a slightly lower rate – nothing too significant, maybe 0.5% lower. Assuming you have the deposit and the repayments are affordable, you could find this is not necessarily a bad time to buy rather than holding off.
There are 2 reasons for that:
- You may find it is still cheaper or not significantly more expensive than renting. So although the rate is higher, you are at least paying down your own mortgage, rather than your landlords.
- Paying a Mortgage will usually appear on your credit file. This can then help with future Mortgage applications as you can evidence 2 years worth of payment history which could help when looking to get a cheaper mortgage deal.
3-6 years after going bankrupt
Getting a Mortgage 3 years after your Bankruptcy discharge date is where you start to see things improve significantly. Once you get to this date, all of a sudden you have maybe 10 lenders who will consider you, rates available start to normalise and we could be looking at rates of around 2.5% with a 15% deposit.
The issue at 3 years discharged is that a lot will depend on which lenders were involved in the bankruptcy and how your credit report looks. If you have a lot of defaults still showing, then you may find you struggle to get it through with a 15% deposit at a low rate, we could still be looking at a 25% deposit and rates of around 4-5%.
4-6 years post Bankruptcy, again your options will be improving all the time during this period. At 4 years, there are another few Mortgage lenders coming in to play, 5 years discharged (6 years from registration) is where your options will start to jump up and it is at this point where the lenders who work off the registration date (rather than the Bankruptcy discharge date) may come in to their own.
Getting a Mortgage once the Bankruptcy has dropped off my Credit file
At 6 years discharged, you will find the Bankruptcy will drop off your credit report. This is great news, however there are still a few things to be aware of…
Some Mortgage lenders will ask the question if you have ever been Bankrupt. Despite it dropping off your credit report, you do need to answer the question as it is asked. The solicitors acting on behalf of the lender will do a Bankruptcy check as standard and so it will come out in the wash.
How to get a Mortgage after Bankruptcy
Hopefully you will have begun to realise that we know what we are doing when it comes to getting a Mortgage after Bankruptcy.
We are specialists in Bad Credit Mortgages and we know your options from day 1 of being discharged through to 6 years down the line once everything has cleared off your credit report.
We know your options with 10-20 defaults/CCJs/arrears and we know your options if it was a one off large debt that resulted in the bankruptcy. This is what we do. We love it when we are able to help a new customer who has had a tough couple of years get your new Mortgage and start a fresh – although we love it more when you come back to us a couple of years down the line and we are able to get you on to something cheaper and hopefully more mainstream, we love seeing the progress made over time.
Get in touch, we are used to seeing people who have been bankrupt. We will listen and understand what happened and then come up with some options and a plan going forward to get you back on track.