Is it possible to get a mortgage for a bankrupt?
It is possible to obtain a mortgage for bankrupts but you will likely need to be discharged from bankruptcy for at least 3 years and have a credit score that has positive trends ever since. You will also likely need a minimum 15% mortgage deposit if you were bankrupt as per most mortgage lender criteria.
Mortgages for bankrupts are a specialist type of bad credit mortgages and a specialist bad credit mortgage broker will be able to advise you on the mortgage lenders who may be willing to look at your case and give you the mortgage you need to purchase your home.
A bad credit mortgage advisor who has experience in mortgages for bankrupts will be able to assist you if:
- You have been discharged from bankruptcy within the last 6 years
- You have a bankruptcy and your home had previously been repossessed
- You have been discharged for bankruptcy but you have less than the 15% mortgage deposit most specialist mortgage lenders may consider
- You have been discharged from bankruptcy but you have only a 5% mortgage deposit
- You have just been discharged from bankruptcy but have a large mortgage deposit
- You want a buy to let mortgage and you have recently been discharged from bankruptcy
- You want to remortgage your property and you have recently been discharged from bankruptcy
- You want a bankruptcy annulment mortgage and second charges
Any credit issue such as missed payments, mortgage arrears, defaults, CCJs, a debt management plan, and so on, will be wiped off once you have been declared bankrupt and marked as settled. In the 12 months from when you are declared bankrupt your credit file will reset and essentially allow you to start from scratch without any negative blemishes aside from the fact that you have been made bankrupt. This bankruptcy marker will remain on your credit file for at least another 6 years after which they will vanish too.
If you pick up new credit issues after you have been discharged from bankruptcy this will remain on your file for another 6 years and many mortgage lenders may not lend to you although a handful might. You should seek the services of a bad credit mortgage broker to assist you if you have incurred further negative marks on your credit file since you have been discharged from bankruptcy.
Which mortgage lenders offer mortgages for bankrupts?
There are over 15 mortgage lenders currently on the market who offer mortgages for bankrupts. Each mortgage lender will have its own criteria which you will have to meet and it is impossible to say what these could be as they can change at any moment.
Most high street mortgage lenders will be able to consider you for a mortgage as long as you have been discharged from bankruptcy, it has been 6 years and the bankruptcy is not on your credit file.
There are also specialist mortgage brokers who offer mortgages for bankrupts but will charge higher APRs and high application fees. These specialist mortgage lenders may be able to offer mortgages to people who have been recently discharged from bankruptcy from 12 months onwards.
Mortgage lenders who lend to discharged bankrupts
There are a variety of mortgage lenders who lend to discharged bankrupts they include:
- Accord mortgages
- Barclays mortgages
- Buckinghamshire BS
- Darlington BS
- Foundation Home Loans
- Kent Reliance
- Royal Bank of Scotland
- Metro Bank
- MBS Lending Ltd
- Vida Home loans
- Skipton BS
Please note the above list of mortgage lenders who lend to discharged bankrupts may change at any time and it is best to check with these mortgage lenders for their updated lending criteria on discharged bankrupts.
What does it mean to be a discharged bankrupt?
A discharged bankrupt is someone who has legally been discharged from having any liability on the debts which they were made bankrupt over. A discharged bankrupt will have been discharged by the courts.
Can you get a Buy to let mortgage after bankruptcy?
It is very possible to get a buy to let mortgage after you have been discharged from bankruptcy but you will likely need a specialist bad credit mortgage broker or specialist buy to let mortgage broker to help you find a mortgage lender willing to lend to you.
To be eligible for most buy to let mortgage lenders who offer mortgages for bankrupts you will need to:
- Have a sizeable mortgage deposit of at least 15%
- Have equity in at least one property
- Been discharged for at least 3 years and had a good credit score since then
- Have an income
How soon after being discharged from bankruptcy could you get a mortgage?
When you become bankrupt you will usually be discharged in 12 months and within those 12 months, you will not be able to access any mortgage so in line with that you can expect to be somewhat eligible for a mortgage from 12 months after you have been declared bankrupt.
In these 12 months, you can begin to show good credit behaviour by repaying your loans on time and only applying for credit you are eligible for.
Most specialist mortgage lenders will not offer you a mortgage if it has been less than 12 months since you were discharged from bankruptcy. Once 12 months have passed you may be able to get a mortgage but the mortgage lender will likely require you have a larger than usual mortgage deposit of at least 35% before they will even assess the case.
After 2 years of being discharged from a bankruptcy, you may find that some lenders are now willing to offer you a mortgage but you will still require a mortgage deposit which is at least 20 or 25% depending on the mortgage lender.
There isn’t a specific guide on the terms each mortgage lender may impose on their mortgage lending to bankruptcy but they will generally fall in line with the above paragraphs.
In general, the longer you have been discharged from bankruptcy the better for you as you will find that many mortgage lenders will be able to offer you mortgages with a loan to value (LTV) of up to 90% and even beyond. This will likely only be the case if you have shown good credit behaviour since you have been discharged from bankruptcy.
Tips on improving your credit score after bankruptcy
- Not taking out payday loans
- Not incurring any further defaults on your credit file
- Not missing any payments on your credit obligations
- Not making too many hard searches
- Only applying for credit products where you are certain you will be eligible for
- Checking your credit score for any issues or errors regularly
- Not accumulating any debt on your credit cards
- Build credit by following the above tips and more credit building guides.
There is no guarantee you will be able to get a mortgage as the lending criteria of mortgage lenders are not public and they may change at any time due to the economic pressure or regulatory changes. Seeking the advice of a good bad credit mortgage broker will help ensure your case has the best chance of getting you a mortgage approval from a suitable bad credit mortgage lender.
How the hunter report could affect your mortgage application?
Once you have been discharged from bankruptcy then you will usually not have any trace of the bankruptcy on your credit file once 6 years have passed and this means you will just be eligible for the mortgage as anyone if you meet the lender’s criteria, have a good mortgage deposit and have a good credit score.
But here comes the hunter report.
What is the hunter report?
The hunter report is a register of anyone who has ever been made bankrupt in the UK. It contains the name of everyone who was made bankrupt and this information is available even after the 6 years have passed.
Most mortgage lenders will check the hunter report but may not do so initially when offering you a mortgage in principle.
This may mean that you get your mortgage in principle, find a property, make an offer, hire a conveyancer, hire a mortgage broker, pay your mortgage application fee, pay for a property surveyor and then get informed by the mortgage lender that you have been denied the mortgage although they had already given you a mortgage in principle.
This situation is quite common so don’t be too worried if this is the case as there are other mortgage lenders who will look at the hunters report and still give you a mortgage. This situation highlights why bad credit mortgage brokers with specialist knowledge of those mortgage lenders who refuse you a mortgage after you have been discharged even though it is not on your credit file and will keep you away from them.
Can you repay your bankruptcy debt with the equity in your home?
Once you have been declared bankrupt if you are able to repay your debts within a given time the bankruptcy could be removed from your credit record altogether. This is known as a bankruptcy annulment.
You may be able to remortgage and use the equity in your home to settle your debts but not all mortgage lenders may agree to this.
But if you do manage to find a mortgage lender who agrees to this then you could have just saved yourself a lot as now you could remortgage in the future without having to find a mortgage lender who offers mortgages for bankrupts.
Your chances of getting a remortgage to pay off the debts you owe will greatly depend on your credit file. If you have never missed payments on your mortgage or other credit agreements then it is likely you will find a mortgage lender willing to lend to you so you can settle your debts and avoid bankruptcy.
If on the other hand you have missed a lot of mortgage payments and have other issues on your credit file then it is likely you will need a specialist mortgage broker to assist you in finding a mortgage lender willing to lend to you so you could pay off your debts with the equity in your home.
Can you use a government scheme as a bankrupt?
Being a bankrupt (or previous bankrupt) may also disqualify you from a whole host of home buying government schemes as they like to see that you have good credit behaviours in the past.
The schemes you may not be eligible for include:
- Lifetime ISA- gives you a government bonus of £1,000 if you save the maximum £4,000 a year.
- Help to buy ISA- gives a maximum bonus us £3,000 if you save the maximum allowed of £12,000. Before you get either you should consider which is better. Lifetime ISA vs Help to buy ISA.
- Help to buy equity loan- gives you up to 40% as a 5-year interest-free equity loan. You begin to pay interest at 1.75 % after the fifth year and 1% plus RPI for every year thereafter.
- Shared ownership- You can buy between 25% to 75% of the property initially with a shared ownership mortgage and then buy more using a staircasing mortgage.
- Armed forces help to buy- similar to the help to buy equity loan but specific for the armed forces personnel giving them an increased chance of acceptance.
- Rent to buy- This is the right to buy scheme on which this guide is currently discussing. A different marketing name is just used. Watch out for this when shopping to avoid missing out on eligible properties due to confusion.
- Right to buy- allows you to buy your home at a discount price.
- Preserved right to buy- same as above.
- Right to acquire- same as above.
You may also be able to use a host of mortgages with the help of your family.
They are a certain type of mortgage known as a family springboard mortgage, they include mortgages from lenders such as the Barclays family springboard mortgage, the lloyds lend a hand
If you need financial advice and you live in the UK then you could contact the Money Advice service over the phone or via chat for impartial advice.
You can also contact the debt charity “Step Change” if you are in debt and need help.