Getting a Mortgage after going Bankrupt has not changed much if at all in the last few years. It has been as good as I feel like it will get for a while. I can not see it improving much any time soon.
Most mortgage lenders work from the discharge date of the bankruptcy. A couple of lenders will work from the registration date however and that can give more options at certain milestones.
Bankruptcy discharge
Getting a Mortgage after bankruptcy has 2 major factors:
- How long you have been discharged for,
- Size of deposit.
The biggest factor by far is how long you have been discharged for. There are 3 main milestones – 1 year discharged, 3 years discharged and 6 years discharged. I think the easiest way to show you the options is to put it in a table.
| Discharge Period | Deposit needed | Interest Rate |
| Less than 1 year | 30% | 6.89%* |
| 1-2 years | 30% | 6.89%* to 7.85% |
| 2-3 years | 25% | 6.89%* to 7.85% |
| 3-4 years | 5% | 5.3%** to 6.3% |
| 4-5 years | 5% | 5.3%** to 6.3% |
| 5-6 years | 5% | 5.3%** to 6.3% |
| 6 years plus | 5% | 5.2% |
* The 6.89% product is with a small building society who are more cautious than the specialist adverse lenders. There are more hurdles to jump through and less likely to be accepted.
** The 5.3% product is with a high street lender. This means the application is reliant on passing a credit score rather than fitting criteria.
When it comes to the high street lenders and passing the credit score. Whilst they can accept an applicant once discharged for 3 years, how your credit report looks will play a big part. If your bankruptcy is due to a tax bill for example and there is no adverse on your credit report it is more likely to be accepted than if you default 10 accounts that are all showing on your credit report.
Other things to consider
Whilst we generally look at how long you have been discharged for and the size of the deposit, there are other things that play a part.
As alluded to above, how your credit report looks can play a part. Multiple defaults will be harder to get past a credit scoring mortgage lender. It is also worth checking your credit report well in advance. You can ensure the defaults were registered at the same time as the bankruptcy. It is not uncommon to see people whose bankruptcy has dropped off, but the defaults are still showing for another 3-6 months after. This can delay being able to make an application or result in higher rates than necessary.
Also many lenders will look at conduct since the bankruptcy. If a lot of debt has been built up again, that could go against you. If payments have been missed or paid late, again it may not bode well. Fitting criteria only forms part of the acceptance process. There is still an underwriter to get past and potentially a credit scoring system.
Lastly, some lenders will work on the date of registration. That will not alter too much on the above. It will add a couple of lenders at the 4th and 5th anniversary’s of the discharged. It will not make too much difference to the overall rates available however.
Summary
I think you can see from the table above that the first 3 years are the hardest following the bankruptcy. Once you hit that third anniversary you are then able to look at something reasonably normal. I always refer people to this IVA & Bankruptcy success story for a difference the 3 years discharged milestone makes.
The 5% deposit is the minimum. I think really your target should be higher if possible as it will improve your chances and potentially lower the rates. But we can take a look if you have the 5%.
It is also worthwhile having a list of your creditors who were involved in the IVA – we may decide to avoid some of those companies or their subsidiaries based on how they underwriter.
Do not run up your credit again, there is no harm having a small credit card to help build your credit score, but just ensure it is paid off in full each month if you want to go down that route.
But the key thing is to get in touch and give us a try. The couple in the success story above thought they have no chance but were just trying on the off chance and they are now in their happy in their family home now.