Going bankrupt is an official recognition that you are unable to pay your debts. You can declare yourself bankrupt or it is a state of affairs which your creditors may impose on you – whether you like it or not.
As Citizens Advice warns, bankruptcy can have serious consequences – both now and for a long time into the future. Bankruptcy has a very considerable impact on your credit rating – and, therefore, your ability to secure any kind of credit in the future, especially a mortgage.
For very good reason, therefore, bankruptcy is often seen as a very last resort to resolving financial problems – you may face a future with seriously limited options when it comes to raising credit or borrowing money.
But those problems may not be insurmountable. With our help here at Needing Advice, we may be able to line you up with mortgage lenders still prepared to advance you a loan even if you have previously been declared bankrupt. Mortgages after bankruptcy are still a possibility.
What is bankruptcy?
Bankruptcy is a state of affairs where your creditors have taken legal action against you to recover the money they are owed. It is a process overseen by the court and it can be voluntary if you decide you cannot pay your debts, or it can be imposed on you by the courts.
Once declared bankrupt, the court will appoint someone – an official receiver – to manage your assets and liabilities. This means that all of your assets will be sold in order to pay off your creditors, and you may be subject to restrictions on what you can do financially.
Mortgages after bankruptcy
This is where Needing Advice can help. We understand that having been declared bankrupt does not mean the end of your dreams of owning a home – or indeed making any other kind of financial commitment. We may be able to help you with mortgages after bankruptcy.
We have access to a wide range of mortgage lenders who we may be able to approach on your behalf. This does not mean that you are guaranteed to get a loan, but it does open up the possibility for you.
Over the years we have received a lot of queries regarding loan approval after bankruptcy, much of which has been successful.
It is important to bear in mind that you may still not be eligible for the same types of mortgages as someone who has never been declared bankrupt. Lenders will take into account your credit score and other financial circumstances, as well as other factors such as the size of the loan and how long ago you were declared bankrupt.
In this comprehensive guide, we will try to answer all the necessary questions for getting mortgages after you go bankrupt. We will answer frequently asked questions such as can I qualify for a mortgage after bankruptcy, how much deposit do I need to under such circumstances, how can I improve my chances of getting a mortgage etc.
Can I get a mortgage if I am bankrupt?
The simple answer is no – and there is a very good reason for it.
You are usually declared bankrupt for a period of 12 months – though it can be longer – and at the end of that period, you are no longer legally responsible for the debts that brought about your bankruptcy. Officially your bankruptcy has been “discharged”.
Until you have been discharged from bankruptcy, the
Always keep in mind that sometimes filing for bankruptcy is inevitable and dissolving your business isn’t always easy. Stay strong and start over, click
Can I get a mortgage after bankruptcy?
By the same logic, though, once you have been discharged from bankruptcy, there is no formal obstacle to your borrowing money or taking on credit once again.
At least, that is the theory. In practice, many lenders avoid any dealings with those who have been bankrupt. Of all the obstacles to getting a mortgage with bad credit, your past bankruptcy is likely to pose the greatest barrier.
Although it is going to be difficult to arrange a mortgage if you have been bankrupt, however, that does not mean that it is impossible.
Here at NeedingAdvice.co.uk ltd, we continue to help those who have previously been declared bankrupt to secure the mortgage they are seeking.
If you are interested in a joint mortgage application with a bad credit report, you can read our article here.
How can I improve my chances of getting accepted for a mortgage after bankruptcy?
The credit reference agency Experian explains that the record of your bankruptcy remains on your credit file, usually for six years or until you are discharged, if that is a longer period of time.
Although any mortgage lender may still ask you whether you have ever been bankrupt, it is the record on your credit history file that is most likely to affect your success in securing a mortgage. So, how can you improve your credit rating to bolster your chances of getting a mortgage after bankruptcy?
- you have a statutory right to access the information on your credit file, so order your report now;
- go through it and update all your personal information, including your current address;
- make sure you are on the electoral roll – that is how your identity is often confirmed;
- ensure that the stated credit history is accurate and up to date; and
- consider adding a personal note to explain any particular instances of financial difficulty (periods or illness or unemployment, for example).
In addition to improving your credit score, of course, the bigger the deposit you can show any mortgage lender, the better.
If you are interested in improving your bad credit record, you can read our article on How to improve your bad credit issues for a mortgage.
Beware of the National Hunter Database
National Hunter is an independent, not-for-profit organisation set up to detect and prevent application fraud in financial transactions.
National Hunter holds data which can help financial organisations cross-check the information in a bid to prevent fraud from occurring.
This twin-track approach to examining your financial affairs, however, may have unfortunate consequences. You might have been discharged from bankruptcy more than six years ago, for example. In that case, your mortgage lender’s search of your regular credit reference agency file showed nothing untoward – and your mortgage application may have been approved in principle accordingly.
On the strength of that approval in principle, you pressed ahead with the proposed purchase of your home and committed to expenses such as survey fees, legal, conveyancing and brokers’ fees.
Following your mortgage lender’s scrutiny of the National Hunter database, however, your historic bankruptcy was noted and the mortgage decision in principleA preliminary decision by a lender to offer a mortgage, base... was therefore withdrawn – leaving you seriously out of pocket.
The lesson, therefore, is that even a bankruptcy more than six years ago – which has therefore been wiped from your credit file – may still come back to haunt you and make life difficult when trying to secure a mortgage.
Seeking mortgage advice from an experienced mortgage broker before you apply for a mortgage after bankruptcy can help.
What types of mortgage can I get after bankruptcy?
There are mortgage lenders prepared to consider your application for a mortgage – even against your background of a past bankruptcy or other bad credit – so you may find that you are eligible for the full range of mortgage products.
Though the terms may be more restrictive than for those with healthier credit scores, you may still qualify for the main types of residential mortgage, buy to let mortgage or remortgages.
You can always contact any experienced mortgage broker before starting your mortgage application.
What if I have bad credit issues after bankruptcy?
Although it is typically regarded as a matter of last resort and carries serious financial consequences, bankruptcy has the distinct advantage of acting to clear all your past debts and wipes your slate clean of records of late payment, County Court judgments (CCJs), or Debt Management Plans.
Theoretically, therefore, bankruptcy has given you the opportunity to effectively reset your bad credit issues and start a new credit file.
The past is still there, of course, so if you get into financial difficulties once again and these play their inevitable part in undermining your credit score, you are likely to find it even more difficult to secure a mortgage. If you are afraid of your bad credit report, you can always contact a specialist mortgage broker for your application.
Next Steps – Mortgage after bankruptcy
Probably the most significant – and most public – admission of financial defeat you can make is to enter bankruptcy. Little wonder, then, that future lenders are likely to shy away from your applications for credit of any kind, let alone a mortgage.
But there are mortgage lenders still prepared to consider your application even if you have been declared bankrupt in the past – and here at Needing Advice, we can help you find them. To start the ball rolling please just give us a call today at 0800 6123367. We’d be delighted to help.
Can you get a mortgage after bankruptcy?
Yes! As long as you can prove that you have had no further problems since your bankruptcy and can show that you are able to meet repayments on time, you should be able to get a mortgage. It is always better to contact a specialist mortgage broker before going to a conventional mortgage lender.
Can I qualify for a mortgage after bankruptcy?
It depends on how much money you owe, what type of property you want to borrow against, and whether you need to take out insurance or not. However, if you do not have any outstanding debt, you will probably be able to qualify for a home loan. Still if you are confused, you can contact a specialist mortgage broker before going for any mainstream lender.
How quickly can I get a mortgage after bankruptcy?
This varies depending on the lender. Some lenders will require you to wait until you have paid off all your existing debts before they will consider giving you a mortgage. Others will allow you to apply while you are still paying off your debts. The best way to find out which bankrupt mortgage lenders will accept your application is to ask one of our expert mortgage advisors who specialise in this area.
How much does it cost to get a mortgage after bankruptcy?
You may be surprised by the amount of money you pay when taking out a mortgage after bankruptcy. This is because the lender must charge you interest on top of the usual charges for a mortgage. In addition, some specialist lenders will also add an administration fee. The good news is that you can usually negotiate with the lender to reduce the overall costs of getting a mortgage. If you are unsure about the fees involved, it is always worth asking a professional mortgage advisor.
What happens if my bankruptcy is discharged?
In many cases, a bankruptcy discharge means that you are free to go back to the same lender and use your old mortgage documents to obtain another mortgage. You will often be required to provide proof of income and assets to support the new application.
What happens if I default on my mortgage?
If you fail to keep up with your payments, your lender will begin charging you interest immediately and may eventually repossess your house. They may also sell your house at auction and recover their losses from the proceeds.
If you wish to avoid these consequences, it is important to make sure that you continue making regular payments on your mortgage. Otherwise, your lender may end up having to foreclose on your home.
How soon after bankruptcy can I get a mortgage?
You should apply for a loan within 3-6 months after being discharged from bankruptcy. Lenders may be less willing to lend money to people who have been discharged from bankruptcy. Your credit score will take a long time to improve. You should consider getting a mortgage if you want to buy a house within 6 years of your bankruptcy discharge date. Otherwise, you’ll need to save more money than you might think.
How much of a deposit will I need after bankruptcy?
Lenders will want a much larger down payment if there is any kind of bankruptcy or foreclosure on your credit history. You’ll need to give them a bigger deposit than someone who doesn’t have these kinds of problems. A typical mortgage rate is 4.69%, but rates go up and down depending on how many people are borrowing money. It’s not unusual for borrowers to borrow 5% or even 10%.
When can I apply for a mortgage after bankruptcy?
Applying for a mortgage after being bankrupt has a lot to do about time. You won‘t be able to apply until you’ve had your bankruptcy discharge. This can take up to 12 months or even longer. Once you’re discharged, lenders will need to assess your creditworthiness before approving you for a mortgage. As a result, your application needs to be presented in the best possible manner and with a suitable mortgage provider. You should be aware of this fact before you apply for a loan.
How Bankruptcy Can Affect Your Ability to Get a Mortgage?
Bankruptcy affects your ability to get a mortgage in several ways:
1. You may find it difficult to get a mortgage as a result of bankruptcy.
2. Your credit rating could suffer as a result of the filing.
3. You may have difficulty obtaining insurance.
4. Your property rights may be affected.
5. You may lose access to certain types of credit.
6. You may have trouble collecting debts owed to you.
7. You may have difficulty finding employment.
8. You may have difficulty renting an apartment.
9. You may have difficulty buying a car.
10. You may have difficulty getting a job.