Can You Get A Mortgage After Being Declared Bankrupt?

August 25, 2022

The past two years have seen the housing market reach a level of activity that has not been seen in decades, and a growing number of people have been looking into mortgages that will help them get the home of their dreams in somewhat chaotic circumstances. 

With the removal of the somewhat infamous stress insurance rate affordability test coming into effect as of the start of August, people will be more eligible for larger loans, but what about people who have historically had difficulties getting a mortgage? 

Poor credit can make getting a mortgage more complicated and getting a mortgage after bankruptcy has been declared by the courts can be exceptionally difficult. 

However, bankruptcy is not the end, and whilst it can be more difficult in the six years that it remains on your credit records, it is not necessarily impossible. If waiting is not an option, here are some tips to help navigate the complexities of acquiring a bankruptcy mortgage

Know Your Discharge Time 

The process of bankruptcy in the UK is fairly lengthy and complex but generally consists of a 12-month period where your financial assets are under the strict control of a trustee. 

During this time, it is impossible to apply for any type of credit, including a mortgage but once this 12-month period is completed (it can be less or more depending on individual circumstances), you can start applying again, albeit with the bankruptcy on your credit record. 

Shop Around 

Once the bankruptcy has been officially discharged, you can apply for a mortgage like you would at any other point. However, the need to shop around for the best rates, deals and lenders for your circumstances is even more pronounced with a bankruptcy on your credit record. 

Some lenders have a policy to not lend at all to people with poor credit and others will not offer the most favourable of terms. However, mortgage lenders tend to specialise in particular areas, types of loan and types of circumstance, so look for a lender who can provide a more tailored solution. 

Build Up A Deposit 

Saving up your deposit is a very important part of the mortgage process regardless of credit rating, as the more you can pay towards the price of the house, the more favourable the terms you can get (up to a certain tipping point). 

As a result, once you are in a more financially secure position after your bankruptcy is discharged, your focus should be on building up your available cash to pay for a deposit and quickly begin the purchasing process. 

Build Up Your Credit Score 

Whilst it may take a few years to truly reap the benefits of an improved credit score, it is never too early to start taking steps to help your case further down the road. 

This can be as simple as closing dormant credit accounts, paying for items on finance that you can evidently afford and paying small but regular payments such as phone contracts or subscriptions. 

Your home may be repossessed if you do not keep up with your mortgage repayments. 

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