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By Pete Mugleston | Mortgage Advisor

Pete has been a mortgage advisor for over 10 years, and is regularly cited in both trade and national press.

Updated: 24th June 2020*

There was a time when getting a mortgage was nigh on impossible with a bankruptcy on your file. And while it can be more difficult, with the right advice, it may be possible to secure finance under these circumstances.

Bankruptcy is considered one of the more severe forms of bad credit, but the good news is that the advisors we work specialise in customers with this very type of credit issue and know will exactly which lender to pair you with for the best chance of mortgage approval.

You’ll find the following topics covered in our guide to mortgages after bankruptcy…

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Can I get a mortgage after bankruptcy?

Yes, despite what you may have heard to the contrary, it is indeed possible to get a mortgage after a bankruptcy.

As with any type of bad credit, bankruptcy can cause real problems with many mortgage providers, who just decline anyone who’s ever had one. The good news is that there are a handful of mainstream lenders (and one or two specialists) that are happy to consider mortgages for people who have been bankrupt.

It may be possible to get either a conventional mortgage, a buy-to-let mortgage or a second charge mortgage with a bankruptcy on your file, under the right circumstances. Read on to find out exactly what they are.

How long after bankruptcy can I get a mortgage?

You won’t be in a position to apply for a mortgage (or any credit) before discharge. Usually, this is a 12-month period but it can be less depending on the court’s decision. Once discharged, you may still find it takes months/years of good conduct before lenders will start to trust your creditworthiness again, so your options are likely to be limited.

In terms of a mortgage application, the exact point at which you’ll become eligible after filing bankruptcy really differs from lender to lender. Some are happy to offer you a mortgage immediately after discharge, but for these, you’ll need to meet very strict criteria, have a large deposit, and be expected to pay a princely sum on fees and rates.

Interest rates after bankruptcy

Mortgage interest rates after bankruptcy are typically higher than they are for customers with a pristine credit report. This is because the lender will likely be taking on a higher risk by offering you finance.

The longer you’ve been discharged, the more lenders in the market that will consider an application with favourable interest rates and at higher loan to value ratios. Those discharged over four to five years with great credit history may find they can borrow up to 90/95% loan to value (LTV) like any other borrower, and for those eligible, some competitive rates from top lenders may be offered as well.

Those recently discharged, say, in the last 0-24 months will find it much harder, but can still get a mortgage with at least 25% deposit in most cases.

This table should make things more clear as it outlines the likelihood of you obtaining a mortgage if you’ve been made bankrupt in the past depending on how long ago you’ve been discharged.

How long after bankruptcy? Bankruptcy registered Years discharged Eligible? Typical deposit required
Recently became bankrupt

0 year ago

0

No

N/A

1 year

1 year ago

0

Possibly

Min 40%

2 years

2 years ago

1

Possibly

Min 25%

3 years

3 years ago

2

Possibly

Min 25%

4 years

4 years ago

3

Likely

Min 15% (poss 95% in some cases)

5 years

5 years ago

4

Very likely

Min 10% (poss 95% in some cases)

6 years

6 years ago

5

Very likely

Min 5%

Over 6 years

6+ years

6+

Very likely

Min 5%

The information in this table is accurate as of December 2018, Criteria can change regularly so it is important you make an enquiry and speak to one of the experts who can provide you with specific, up-to-date advice.

In no way does this guarantee you a mortgage, it is simply a collection of info and knowledge from our experienced advisors to act as a guide for anyone wanting to establish the likelihood of being approved by a lender.

It doesn’t take into account the numerous other individual factors such as credit score, income, affordability, or other credit problems since the discharge.

Getting approved for a mortgage after bankruptcy

If you’ve been made bankrupt in the past and are looking for a mortgage, there are a few things you can do to make sure you have the best chance of being approved.

1. Check and correct ALL your credit reports

This is paramount. There are 3 main credit reference agencies lenders use (Experian, Call credit, and Equifax), and the information on each can differ greatly. Often we have borrowers come to us and the info on their credit files don’t match the date of the bankruptcy discharge and the settlement dates of their credit accounts they once held.

This is often due to the creditors not updating their records correctly. As a result, many creditworthy borrowers are declined because it appears as though they have outstanding balances and/or defaults that happened since the bankruptcy. Getting this info updated on all three reports is crucial.

2. Check your eligibility

Make an enquiry with one of the experts and allow them to establish which lenders would consider an application as things stand – if you would qualify now, great. If not then they will advise you on what changes you’ll need to improve your credit and become more eligible, for instance correcting your report, waiting until your bankruptcy discharge is older, or perhaps saving a little extra deposit.

3. If you’re not eligible now, rebuild your score until you are

There are many ways you can rebuild your credit score and show mortgage lenders that you can be financially responsible and meet your monthly payments. Some ways include:

  • Register for the electoral roll
  • Manage and pay your bills on time
  • Don’t max your credit (the less you use the better)
  • Use a credit-builder card or loan
  • Take out a small form of credit, such as a store card
  • Limit your credit applications

Your advisor will point you in the right direction and let you know exactly what steps you need to take to improve your credit and increase your chances of getting a mortgage. If you want more info visit our guide to rebuilding your credit score.

What is the National Hunter Database?

The National Hunter Database is a register of anyone made bankrupt in the UK, including those who may have been discharged over six years ago.

Lenders do check this report, but it doesn’t usually form part of the initial credit scoring, and as a result, some applicants find they get accepted at initial application but are later declined when further checks bring the bankruptcy to light.

Those discharged over six years ago should have no trace of bad credit on their credit files, and may think they can apply with just any lender. They approach their bank and pass the initial credit score, but are later declined after a full application. Why? Usually, this is due to the National Hunter Database.

This can be massively frustrating to borrowers who are handed a decision in principle certificate, and pay for a valuation and make a full application, to then be declined days/weeks down the road.

If this sounds like you, or if you’re thinking of applying for a mortgage having been bankrupt in the past, don’t worry – there are several lenders that may still consider your application.

How other credit issues after bankruptcy impact mortgage applications

If you’ve had new credit issues after the bankruptcy this can start to cause problems. Lenders will, of course, consider you higher risk if you’ve been bankrupt in the past and as we’ve covered, some will never offer a mortgage, but most of those who do will want to see a clean credit file thereafter.

This also includes ensuring the credit that defaulted as part of the bankruptcy is marked as up to date on the credit file, as often this needs correcting before you make an application.

If you’ve had new credit issues since your bankruptcy then it depends what they are and how recent. A lot of the bankruptcy lenders will decline if you’ve had new issues, but there are some that will lend to you in the right circumstances.

If, however, you’ve had other credit issues before the bankruptcy, such as missed payments, mortgage arrears, defaults, CCJs, a debt management plan, and so on, then the bankruptcy is designed to effectively wipe them off as settled.

This then resets your credit file, and following a year being of being unable to borrow or take any credit agreement, discharged borrowers are able to start to rebuild their credit files from scratch.

Make an enquiry and we’ll match you with an expert for a free, no-obligation chat. They have ‘whole-of-market’ access, meaning that they can find mortgage products that best suit your needs.

We’ll find the perfect mortgage broker for you - for free

Save time and money with an expert mortgage broker who specialises in cases like yours

  • We've helped over 120,000 get the right advice
  • Our form only takes a minute, then let us do the hard work
  • Save up to £400 per year with the right advice (source: FCA)
  • All the brokers we work with have whole of market access

Which mortgage lenders offer mortgages after bankruptcy?

Currently there’s about 20 discharged bankrupt mortgage lenders. They include Accord Mortgages, Kent Reliance, Metro Bank and Vida Homeloans. Some mainstream providers such as Halifax and Santander, might consider offering favourable rates and ignoring the bankruptcy once it’s over a certain number of years discharged (usually four), under the right circumstances.

Specialist mortgage lenders are for bankruptcies discharged less than three years ago and tend to come with higher fees and slightly higher rates.

Because each lender and each customer is different, it’s impossible to say which you’ll be eligible for without knowing more about your situation.

Buy to let mortgages after bankruptcy

It is possible to obtain a buy to let mortgage if you’ve been bankrupt in the past, depending on your circumstances. Ideally, you’ll need to meet the following criteria:

  • have been discharged for three years, and had clean credit since
  • have at least a 15% deposit
  • own at least one other property
  • have a personal income (no minimum threshold needed but you do need some form of personal income, whether self-employed, employed, or retired.

Repay bankruptcy debt with equity in your home

Raising finance to repay a bankruptcy debt can actually remove the bankruptcy from your record if done in the right way and within a certain timeframe – this is called an annulment, and is a practice that’s seldom exercised, but can often be life-changing when it means borrowers are given the opportunity to get their debts back up to date.

Depending on the reason for the bankruptcy, finding the right lender can be a difficult process. For example, if you have been maintaining all payments on your personal borrowing (credit cards, loans etc.) but had a bankruptcy forced by HMRC if you’re self-employed and owe a tax bill, your credit report may actually look clean but most mortgage lenders would still decline to lend.

There are however some secured loan lenders who would allow refinancing to get things settled, which would then allow the borrower to remortgage later down the line with a clean credit file without the bankruptcy.

Conversely, if you have defaulted on numerous accounts and/or had payments missed, the chances of mortgage lenders considering the finance can also be slim, but secured lending with a specialist second charge mortgage might still be a viable option.

If you are looking to settle a bankruptcy then it would be worth talking to a specialist, so get in touch and we’ll connect you with an expert for an unmatched level of service.

Do you lose your house if you declare bankruptcy?

This is a possibility, but don’t panic just yet. There could be options available to you.

While you may not lose your home as part of the bankruptcy itself, it could be repossessed if you’re behind on your mortgage payments. Your lender has the option to take action to recover the debt if you’re in arrears. This could include repossessing the property.

There are a number of scenarios where you may be able to prevent or delay a repossession, including…

  • If you have family or dependents living with you
  • If you’re in negative equity
  • If somebody buys your share of the property

If you’re facing bankruptcy, it’s always a good idea to contact your lender to discuss how this could affect your mortgage. You can also find useful information on the Citizen’s Advice website as well as our repossession rescue and bankruptcy annulment guides.

What happens to your mortgage?

Your mortgage is not written off if you declare bankruptcy. Only unsecured debts are stricken from the record. This means that you will likely have to keep up with your mortgage payments if you wish to remain in the property.

If the lender decides to repossess the property, it would normally be sold at auction to settle the debt. If there is a shortfall after the sale, the debt becomes unsecured and could potentially be written off under the terms of your bankruptcy.

Mortgage arrears are also not included in bankruptcy, so you will still need to pay these back to your lender.

Speak to an expert about mortgages after bankruptcy

If you have a bankruptcy on your credit file, seeking specialist advice before you apply for a mortgage will ensure you have access to all of the most favourable deals you qualify for.

The specialist bad credit mortgage brokers we work with are on hand to help you find the lenders with the right expertise to help bankruptcy customers. Call 0808 189 2301 to speak to one of them on the phone today or make an enquiry online.


Updated: 24th June 2020
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FCA disclaimer

*Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The info on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.