Mortgage After Bankruptcy
A mortgage after bankruptcy is a type of mortgage which is secured against the value of your home and available for people who are applying after bankruptcy. There is a range of mortgage lenders who are happy to lend to people after bankruptcy.
Types of Mortgage after Bankruptcy
It is possible to apply for a mortgage when considering buying your own home as well as a remortgage if you already own your own home. Contrary to belief somebody who is made bankrupt will not necessarily lose their home especially if mortgage payments are kept up to date.
In addition to mortgages for residential purposes, buy to let mortgages can also be obtained if you are a discharged bankrupt as well as second charge mortgages.
There is a range of mainstream and specialist mortgage lenders who will lend to discharged bankrupts. As the name suggests specialist lenders specialist in providing a mortgage for those who have adverse credit issues.
Waiting Periods after Bankruptcy before Applying for a Mortgage?
Mortgage lenders will not consider an application from you until you are discharged from bankruptcy. This is typically 1 year after the bankruptcy order has been made. It can be a shorter or longer period depending on the circumstances and the decision of the court.
Day 1 Discharged Bankruptcy – There are lenders who will consider offering a mortgage to day 1 discharged bankrupts. This means that you could depending on your circumstances apply for a mortgage the day after you have been discharged. Expect criteria to be a little tougher if you have not been discharged for very long.
LTV’s (Loan to Value) – Mortgage After Bankruptcy
There are several lenders who will be more favorable to applicants who have a larger deposit or have more equity within their property. In this case some lenders will lend as follows:
- Less than 80% LTV = 2 years discharge period.
- More than 80% LTV = 5 years discharge period.
How Long Should I Wait Before Applying for a Mortgage?
The longer you leave it the better your chances are a good rule of thumb to go by.
It is definitely the case that the longer you leave it:
- The less deposit you will need to put down.
- You will have a higher chance of being accepted.
- You will have a choice of more lenders each with different criteria policy. If you do not meet lending criteria with one lender there might be a different lender with criteria better suited to your circumstances.
- Your credit score will improve over time and this will increase your chances of approval. Some lenders specialise in offering mortgages to those with poor credit history but expect to pay a slightly higher interest rate.
Avoiding Potential Problems
It is probably natural to assume that your bankruptcy does not matter once it drops off the credit report after 7 to 10 years from the filing date. This is not exactly true! Some lenders will require you to declare your bankruptcy no matter how long ago it was. If you do not declare the bankruptcy and the lender finds out, then it is likely that the lender will decline your application due to non-disclosure. Lenders often use the National Hunter Database during an application process which can confirm if you have ever been bankrupt.
Some lenders have a policy not to lend to discharge bankrupts no matter how long ago or what the reason was for the bankruptcy. This is why it is essential to use a specialist mortgage broker who regularly deals with this type of mortgage application.
REMEMBER: We are on your side so it is important to tell us everything! Take a look at the government website!
Please look at this short video from the Insolvency service.
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01157 14 1988 or 07504 262 317
I will be happy to have an initial chat with you to find out what you want to achieve.