Get a Mortgage after Bankruptcy
Despite what you may think it is possible to get a mortgage after Bankruptcy. During the Credit Crunch (2009-13) everyone found it more difficult to get mortgages. For post bankrupts it was almost impossible. However things have changed. There are now lenders who will offer you sensible deals. And you do not have to wait as long as you might think. Some companies are offering up to 90% loan to value mortgages just 3 years after bankruptcy.
How to get a mortgage after Bankruptcy
**Update** If you want to apply for a mortgage after you have been bankrupt you will need to use a specialist mortgage broker. Contact us today and we can put you in contact with a Mortgage Broker who can help you.
The rule of thumb about getting a mortgage after bankruptcy is the longer you wait the better terms you will get. Generally speaking the main restriction is the amount of deposit you can make available. If you can offer a 50% deposit then you may be able to get a mortgage immediately after you are discharged. If you wait for 2 years this drops to 30%. If you wait for 3 years it is possible to get a mortgage or re-mortgage with a deposit of just 10%.
Of course even 2 or 3 years after your bankruptcy your credit rating will still be poor. As a result the rate of interest you are likely to be offered by lenders will not be as low as if you had never had debt problems. However the rates are not as high as you might think. Some lenders are offering rates of between 6%-7% over the Bank of England base rate.
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Saving for a Mortgage Deposit after Bankruptcy
The amount of deposit you will need to get a mortgage after bankruptcy reduces substantially over time. If you are prepared to wait for 3 years after you are discharged you may only need a deposit of 10% of the value of the property you want to buy. Given this you may find that you are forced to wait a few years before you can consider applying.
Having said that waiting is not necessarily a bad thing. Obviously the longer you wait the more money you will be able to save. However this will also help you get used to your new life without debt. It is important that having been through bankruptcy you now continue to live within your living expenses budget and do not overspend.
If you get in the habit of budgeting this it will make saving for your deposit much easier. In addition when you do apply for a mortgage you will understand your financial situation and the maximum level of mortgage payments you can afford. You will then be able to get a mortgage with the confidence that you will be able to pay it.
Should you avoid Bankruptcy if you want to get a Mortgage?
The fact that you have been bankrupt will not prevent you from getting a mortgage in the future. As such if you know this is what you will eventually want you do not need to avoid this debt solution.
You may wonder whether using an alternative debt solution might make your chances of getting a mortgage any easier. However this is not the case. For example if you were to use an Individual Voluntary Arrangement (IVA) you might be able to get a mortgage immediately after completing the arrangement if you have a deposit of 30%. However in reality this is 5-6 years from starting your IVA. You could get the same deal 3 years from the date you went bankrupt.
BE Tip: Whether or not you will be able to get a mortgage in the future should not be one of your main concerns if you are struggling with debt. You should focus on finding the solution that will best solve your problem and get you debt free in the best way possible. However you can now be assured that whichever solution you chose mortgage options will be available to you down the line.
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