Last reviewed on 24th August 2023 by Martin Alexander (Mortgage Advisor)
If you’ve been discharged from bankruptcy, getting a mortgage is possible. That being said, bankruptcy can make mortgage approval difficult. It isn’t uncommon for applicants to be declined because of bankruptcy. If you’re applying for a mortgage after bankruptcy, you would most likely need an advisor who specialises in adverse credit.
Any form of bad credit can be a concern for most lenders, but bankruptcy is considered to be one of the most severe. This doesn’t mean to say that each lender is the same. There are a handful of lenders that may see past your bankruptcy. Furthermore, there are specialist lenders who solely focus on mortgages that involve credit issues.
Key features include:
- Mortgage after bankruptcy (minimum 5% deposit)
- Buy to let mortgage after bankruptcy
- Remortgage after bankruptcy
You can speak to an advisor by calling 0800 195 0490 or by making an enquiry.
When can I apply for a mortgage after bankruptcy?
Applying for a mortgage after bankruptcy has a lot to do with time. You won’t be able to apply for a mortgage until you’ve been officially discharged. Being discharged from bankruptcy usually takes twelve months but it can be less in some cases. Once discharged, lenders may agree to a mortgage, especially as more time passes.
If you apply for a mortgage straight after discharge, approval is difficult but it’s not impossible. Your mortgage assessment will follow very strict guidelines so the rest of your application needs to be strong. As a result, it’s important your application is presented in the best manner and with a suitable lender.
Please note: If you’ve just been discharged from bankruptcy (one year or less), lenders will require you to have a substantial deposit and may charge you higher rates than normal.
What if my bankruptcy happened some time ago?
As each year goes by, your bankruptcy becomes more distant and less relevant in the eyes of a lender. Lenders may offer you better rates and fees, along with approving mortgages with lower deposits.
If you’ve been discharged from bankruptcy for around four years, then most lenders will view you as a regular applicant. This is especially true if your credit history has been kept intact since your bankruptcy. This means that after four to five years, you could be eligible for great rates and should only require a 5-10% deposit.
If you’re still unsure, our specialist advisors can help you check whether or not you’ll qualify for a mortgage.
How much deposit will I need?
Although the time discharged from your bankruptcy will play a large part in the amount of deposit you’ll need, there are other factors. This can vary for each person, so use the following table as an approximate guideline. We can also provide you with a more accurate amount once you’ve spoken to an advisor.
|Time discharged from bankruptcy||How much deposit will I need?|
|Less than a year||40%|
|3 years or more||5% (subject to good credit since)|
Tips for applying for a mortgage after bankruptcy
The last thing you’d want to do after bankruptcy is to rush into a mortgage without speaking to a specialist. You’ll be considered a high-risk applicant and will therefore need to proceed with caution.
Ways to improve your chances of a mortgage after bankruptcy include:
- Check your credit file
- Only apply with suitable lenders
- Save as much as you can for a deposit
- Speak to an adverse credit specialist
- Take steps to improve your credit score
Check your credit reports
We’d recommend the first thing to do, is to check your credit score. This is important because your credit reports may show irregularities with your financial profile. We’ve often seen vital information that has been incorrectly documented in a client’s credit report, such as the date of bankruptcy discharge being inaccurate.
Having incorrect discharge dates on your credit file can make mortgage approval increasingly difficult. Irregularities such as these can occur due to basic admin errors from creditors, which is more common than you may think.
It may seem like a simple check, but it is crucial, as this could result in you being declined for a mortgage after bankruptcy. You may also find other credit issues on your credit file that you weren’t even aware of. This is why it’s advised to check your credit report before you apply, so you can rectify any issues.
Which mortgage lenders accept bankrupts?
If you pass an initial credit check, bankruptcy can still ring alarm bells for certain lenders. Even if the bankruptcy was over six years ago, some lenders will simply decline. This means you may pass the initial stage of getting a decision in principle, but then fail on getting a formal mortgage offer. This can be a costly mistake as you may have already paid survey fees and broker fees.
Many applicants are declined for this reason, as not all lenders will approve a mortgage for discharged bankrupts. This doesn’t mean that you can’t get a mortgage as a discharged bankrupt, it means you must apply with the right lender.
This brings us to our next point.
Why does my deposit amount matter?
The more you can save for a deposit, the better. This is especially true if you’ve had a history of bankruptcy. Having a larger deposit lowers your risk, but it can also give you access to more lenders with better rates.
If you have a 5% deposit, a mortgage may be possible, but you’ll have fewer lenders to approach. Furthermore, mortgage rates may not be the most competitive. In comparison, aiming for a 10-20% deposit can unlock better rates while also giving you access to more lenders and mortgage products.
Credit issues after the bankruptcy
Any credit issues before your bankruptcy should be settled, as this is the purpose of accepting bankruptcy. Bankruptcy acts as a mechanism to reset your credit file and once you’ve been discharged, you’re able to rebuild your credit file from a clean slate. That being said, credit issues after discharge can cause problems when applying for a mortgage.
The following credit issues can be considered in addition to your bankruptcy:
- CCJs on your credit file
- Defaulted payments
- Late payments on your credit file
- Using payday loans before a mortgage
If you’ve encountered new financial issues that have impacted your credit file, then it becomes even more difficult to get a mortgage. Don’t be disheartened as there are still lenders who may approve you. That said, the majority will at least want to see an impeccable credit file since the discharge. Having further bad credit since your bankruptcy limits the lenders you’ll be able to approach.
If you find yourself in this situation, it’s crucial that you speak to an advisor before making an application. The last thing you’d want to do is to take a chance with a lender at random. This can severely hamper your chances of being approved for a mortgage after bankruptcy.
Buy to let mortgage after bankruptcy
If you need a buy to let mortgage after bankruptcy, then you’ll need to speak to a mortgage advisor. Bankruptcy is a specialist area, so you’ll more than likely need a specialist by your side. An advisor can greatly improve your chances of getting a mortgage.
- The discharge date was at least three years ago
- You’ve had clean credit since your discharge
- Minimum 25% deposit
- You’re already a homeowner
- Can prove a secure income (employed, self-employed, or retired)
If you don’t meet the above criteria, we may still be able to help. Bankruptcy is a specialist field and often requires specialist knowledge. Remember, you can ask our advisors for help if you need to.
Mortgage advice for discharged bankrupts
As specialist mortgage advisors, we know exactly which lenders are likely to approve you for a mortgage after bankruptcy. Even if you can pass a credit check, certain lenders may not allow bankruptcy at all and will therefore decline your application.
Based on your situation we can pinpoint the exact lenders that may find you eligible for a mortgage. We can also avoid lenders that we certainly know won’t approve a mortgage, minimising the chances of you being declined.
About the author
Martin is a senior mortgage advisor and has held a CeMAP qualification for over 15 years while also completing an MBA in Global Banking & Finance.