The short answer is YES you can get a new mortgage if you have been bankrupt before and have now been discharged. Typically when you enter into a bankruptcy you can’t do very much for at least a year until you are discharged from the bankruptcy.
People go into bankruptcy for all sorts of reasons, sometimes it’s due to having so much debt that they can’t manage it and there’s realistically no way of repaying it, sometimes if you’re a business another company can force you into a bankruptcy. There are a whole host of reasons but don’t worry it doesn’t mean that you can’t own your own home.
A bankruptcy stays on your credit file for 6 years and you will also be entered onto the insolvency register. This of course has a profound effect of your credit worthiness and many mortgage lenders can be cautious when it comes to a new mortgage following a bankruptcy.
A lot of mainstream high street mortgage lenders won’t accept a new mortgage application until you have been discharged for at least 6 years, however there are many more options than this available.
The first thing to remember is that if you’re planning on buying a home after the discharge then you’ll almost always need a higher deposit amount. The highest deposit amount is needed if you’ve only recently been discharged but this reduces over time to normal loan to value limits after 6 years.
There are lenders that will allow an application when you are classed as a ‘day one discharge’ which means you’ve only just been discharged from the bankruptcy. These lenders want the largest deposit size of 30% and the interest rates are normally quite high in comparison to standard mortgage rates. They will want to do quite a lot of due diligence to make sure that you can afford your new mortgage and you really do have to play to their tune.
After 2 years of being discharged there are generally a few more options and the deposit size often reduces to 25%, and whilst the the interest rates are still high they tend to not be as punitive as you might at first think.
Once you’ve reached 3 years of being discharged the options really do open up at this point and the loan to value limits start to rise up to 85%-90% the interest rates start to come down to more reasonable levels and it becomes much easier to get approved, however there is still only a handful of mortgage lenders at this point and they will scrutinise your application more than a standard application.
A few things to be aware of it you’re looking to get a mortgage after bankruptcy are as follows.
1. Make sure that all documentation is registered to your current address
2. Make sure your credit file has been updated properly and there are no mistakes showing on the credit file, which can often happen following a bankruptcy – if there are mistakes you can ask to get these rectified by lodging a dispute with the particular credit reference agency, along with the creditor who has registered it.
3. Make sure you keep all your bankruptcy documentation to hand as it may be needed to prove the debts that went into the bankruptcy.
4. Make sure that you’re very careful with credit after your bankruptcy – any missed or late payments since discharge will be viewed very poorly and may be the difference between an acceptance or a decline.
Conclusion
There are a lot of variables to consider when it comes to getting a mortgage after a bankruptcy and if you are considering it then make sure you get mortgage advice sooner rather than later.
We have years of experience in helping people who have had previous bankruptcies get approved for a mortgage so talk to us about your options but remember that you’ll need quite a significant deposit and the interest rates are going to be higher than the norm.
