Will I be able to get a Mortgage after Bankruptcy?
It is possible to get a mortgage after Bankruptcy. However you will normally need to wait between 2-3 years after you have been discharged. This is because the record of your bankruptcy will still be on your credit file.
During this period you will need to do various things to speed up your chances of getting a mortgage. This include saving for a deposit and trying to improve your credit rating.
When can you apply for a mortgage after Bankruptcy?
There are no hard and fast rules about how long you have to wait before you can successfully apply for a mortgage after bankruptcy. However you will normally have to wait for 2-3 years after you are discharged.
Just after you are discharged your ability to get a mortgage will still be very limited. This is because your credit rating is still be very poor. Any potential lenders will do a credit check and see a recent bankruptcy on your credit file. This will indicate to them that you are a high risk and they will not accept your mortgage application.
After 2-3 years your credit rating will have started to improve. At this point you may be accepted by a sub-prime lender. These are mortgage lenders who are more prepared to lend to people who have had issues with credit in the past. You may have to wait longer if you want to use a high street mortgage lender.
Saving for a Mortgage Deposit
Waiting for 2-3 years before you can apply for a mortgage even from a sub-prime lender may seem a long time. However one of the things you also need to bear in mind is that you will not have any chance of getting a mortgage unless you have a reasonable cash deposit.
As a rule of thumb the larger the deposit you are able to offer the easier it will be to get a mortgage. This is because you will need to borrow a smaller mortgage compared to the value of the property you want to buy. In this situation more lenders will consider lending to you.
BE Tip: As a minimum you must expect to be able to offer a deposit of at least 15-20 percent of the value of the property you are looking to buy.
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How can you improve your chances of getting a Mortgage after Bankruptcy?
The first thing you need to do if you want to apply for a mortgage after bankruptcy is start to improve your credit rating. There are various actions you can take which will help you do this.
First of all you can check that any default notices on your credit file are issued no later than the start date of your bankruptcy. If they are you should contact the associated creditors and request that the date of issue is changed to the same date as you were made bankrupt.
Secondly you need to start building up a history of responsible borrowing and repayment. One of the best ways to do this is by applying for a so called credit repair credit card. These are offered by a number of lenders. Paying off the balance on the card in full each month will start to generate a history of responsible credit usage on your credit file.
BE Tip: These cards have a very high rate of interest and should only be used if you can afford to pay off the balance in full each month. As such you will never incur interest charges.
Should you avoid Bankruptcy if you want to get a Mortgage?
Almost all debt solutions will negatively affect your credit rating. Given this it 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 the problem.
If the best solution for you is bankruptcy then yes it is likely to affect your ability to get a mortgage for the next few years. However it does not mean that you will never be able to get a mortgage in the future.
Declaring bankruptcy will have a negative effect on your credit rating in the medium term. However it will also leave you free of your unsecured debt. As such when you do eventually come to apply for a mortgage you will not have other debts and you can focus on making sure your mortgage is paid on time.
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