Get a Mortgage after Bankruptcy
- 24 Nov 2021
It is possible to get a mortgage after Bankruptcy. Your options will depend on how long it is since your Bankruptcy started. Also your income and the amount of deposit you have available.
Included in this article:
- How to get a Mortgage after Bankruptcy
- What size deposit will you need?
- Should you avoid Bankruptcy if you want to get a Mortgage
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How to get a Mortgage after Bankruptcy
During the Credit Crunch (2009-13) everyone found it more difficult to get a mortgage. If you had been bankrupt it was almost impossible. However things have changed. Once you are discharged there are now lenders who will consider you.
If you went bankrupt within the last 6 years the challenge you have is that the record is still on your credit file. This will severely limit your options. As such it is almost certainly best to wait until the record comes off. This will happen automatically on the 6th year anniversary of the start date.
Once your credit file is clear there are now a few high street lenders who will consider you at standard interest rates. However not all of them. You will normally have to speak to a specialist broker who can advise you.
It will be very difficult to get a mortgage while the record of your bankruptcy remains on your credit file. During this time you will have very limited options if any.
Contact us for more advice on whether you might be able to get a mortgage after you are discharged from bankruptcy
What size Deposit will you need?
Nowadays if you are looking to buy a house you always need to put down a deposit. It will be impossible to get a 100% mortgage. However even if you have been bankrupt in the past, given you wait long enough this should not present too much of a problem.
Once the record of bankruptcy has come off your credit file, you should aim to put down a deposit of 10% of the value of the property. There may be a lender who is willing to consider a smaller amount, but they will not accept less than 5%.
Of course the larger amount you can put down, the more mortgage options you will have. If you are a 1st time buyer looking to buy a newly built home you may also be able to get help from the Government. The help to buy scheme lends you up to 20% (40% in London) so you will only need a 5% cash deposit.
As a rule of thumb you will only be able to borrow up to 4.5 times your gross salary. This is to ensure your mortgage is affordable.
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 IVA might make your chances of getting a mortgage easier. However this is not the case.
An IVA it is likely to last 5-6 years. As such you will have to wait at least this long before you can even start thinking about getting a mortgage. After this time it is likely that you would actually end up with the same deal as if you had gone bankrupt.
Getting 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 fastest way possible.