Can I get a mortgage if I'm a discharged bankrupt? Read our 2016 update...
For people who have been declared bankrupt it’s common to have worries and concerns over whether you will ever be able to take out a new mortgage.
In the post-credit crunch days since the financial crisis of 2008, lenders have become stricter about who they will lend to, how much they are willing to lend and under what terms.
Not good news for those who have had serious credit problems in the past.
And of course, under the terms of your bankruptcy order, you’ll be unable to apply for a mortgage within the actual bankruptcy period itself, which typically lasts a year, sometimes less.
Your Mortgage Options As An Ex-Bankrupt
Most major banks and building societies are still reluctant to lend to someone who has been bankrupt. However there are currently around a dozen UK lenders for discharged bankrupts, mostly boutique lenders who will assess each case on it's merits.
These specialist mortgage providers will likely be your best bet to secure a mortgage if you've been discharged 3 or 4 years.
How Soon After Being Discharged From Bankruptcy Can You Apply For A Mortgage
Currently there are very few lenders willing to even consider an application within the first year or two post-discharge, and those that do will have extremely tight lending criteria to mitigate the risk. For instance, they may require the borrower to provide a deposit of 40% or more. Fees and interest rates will also be significantly higher.
So unless you have the means to consider this option, we recommend waiting at least three years before approaching a broker or lender.
After three years, the specialist mortgage lenders we can provide access to will become more amenable to a mortgage application as long as you’ve built up a good credit history since discharge. Typically lenders are prepared to lend around 75% loan to value at this stage. So you will need a 25% deposit at least.
After about four years, more specialist lenders will be available to you in the market, and you should find it slightly easier to secure a deal. Possibly with just a 15-20% deposit.
Whilst their fees will still be higher, the interest rates charged should only be slightly above those of the mainstream high street lenders.
Assuming you’ve built up a healthy credit profile in the intervening years, from five to six years post-bankruptcy, you should find some mainstream products at excellent low APR’s and 90%-95% LTV becoming available to you again. Of course, the normal credit and affordability checks will still apply.
Check Your Credit Report
The first and most important thing to do before making a mortgage application is to obtain a copy of your credit reports.
The 3 main credit file agencies in the UK are Creditexpert.co.uk (Experian), Equifax.co.uk and CallCredit.co.uk. Get a copy of at least one but ideally all three reports as different lenders use different credit report services, and the data held in them can vary.
By the way, you can get hold of Equifax and Call Credit reports at the same time using a handy service called CheckMyFile.com
When Does A Bankruptcy Clear From A Credit Report?
Six years after the date of the bankruptcy order, so typically 5 years or so after being discharged. At this point, your credit file should be clear of adverse credit references, though you should check this and repair it if necessary.
A caveat to the six year rule is what is known as the Hunters report available at http://www.nhunter.co.uk. The Hunter report is similar to a credit report but concerns itself purely with fraud. It contains records of all UK registered bankruptcies, including those more than six years ago.
Some mortgage providers will check the report and decline your application once they see the bankruptcy, even if they’ve previously given an agreement in principle. However other lenders will take a more positive view and our advisors can provide guidance on this.
Your Next Step...
The mortgage advisors we work with specialise in mortgages for ex-bankrupts. So if you're already discharged and maintained a good credit record post-bankruptcy, they can often help.
To get started, simply complete our 60 second application form and get a free no-obligation mortgage quote.