Can you get a mortgage after bankruptcy?

If you’ve been bankrupt in the past, you’ve clearly had financial difficulties. That means any lender will look very closely at your situation before offering you a mortgage. But the good news is there are steps you can take to give your application a better chance of success.

If you’ve been bankrupt in the past, you’ve clearly had financial difficulties. That means any lender will look very closely at your situation before offering you a mortgage. But the good news is there are steps you can take to give your application a better chance of success.

Daniel Evans
Mortgages expert
4
minute read
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Last Updated 25 FEBRUARY 2022

Can I qualify for a mortgage after bankruptcy?

If you’ve been made bankrupt, you’re unlikely to qualify for a standard mortgage deal. This can also be true if you’ve had County Court Judgements (CCJs) against you. But that doesn’t mean you won’t be able to get a mortgage – if you can afford one.

Many high-street mortgage lenders won’t lend to anyone with bankruptcy in their credit history, but there are specialist lenders who may be able to help you. However, you’ll probably need a much larger deposit and be charged a higher rate of interest than someone with a good credit score.

Lenders may also limit the amount they’re willing to lend to you as a percentage of the property value, depending on your credit record.

How soon after bankruptcy can I get a mortgage?

Some lenders will consider your mortgage application as soon as you’re discharged from bankruptcy. But others might not consider you until you’ve been discharged for at least 12 months, if not for several years.

Bankruptcy remains on your credit file for six years. This is likely to make it more difficult and more expensive to get a mortgage during this time. The longer you’ve been discharged and shown to have improved your credit record, the more likely lenders are to offer you a favourable interest rate.

If you wait six years after your bankruptcy is discharged (which usually takes 12 months) and then apply for a mortgage, your bankruptcy will no longer appear on your credit file and you’ll have had the opportunity to build a good credit score. At this point, it could be worthwhile applying for a conventional mortgage.

But to reduce the risk to themselves, lenders will expect you to put up a large deposit. How fast and how much you can save for your deposit may be the biggest limiting factor on how quickly you can get a mortgage.

How much of a deposit will I need after bankruptcy?

If a bankruptcy is still showing on your credit history, lenders will want a much larger deposit than from a homebuyer with a good credit history. The amount needed will vary among lenders and may also depend on your personal circumstances. But it could typically be 20%-50%.

With the average UK house price at £270,708 in November 2021, a 20% deposit equates to just over £54,000. Plus, you’ll have to pay all the usual moving expenses, fees and stamp duty. If you need a 40% deposit, that comes to just over £108,000.

Will I always have to pay a higher rate of interest on my mortgage?

Not necessarily. If you get a mortgage from a specialist lender and meet your repayments on time and in full, your credit rating should start to recover. With a stronger credit rating, you might, at some point, be able to remortgage and move to a conventional mortgage lender offering more competitive interest rates.

Just make sure you understand any fees and penalties you might have to pay if you switch providers.

Tips for getting a mortgage after bankruptcy

1. Use a mortgage broker

If you’re thinking of applying for a mortgage, a broker could offer advice on the options available to you. This could include applying to a specialist lender – also known as an adverse lender – or waiting until bankruptcy is no longer on your credit file.

We’ve partnered with London & Country Mortgages Ltd (L&C)** to provide you with fee-free mortgage advice. Get in touch with one of their advisers.

Go to L&C mortgages

About London & Country Mortgages Ltd (L&C)

**London & Country Mortgages Ltd (L&C) are a multi-award winning mortgage broker with over 20 years’ experience in helping people secure their perfect mortgage. Advice is provided by L&C, who are authorised and regulated by the Financial Conduct Authority (143002).

L&C are not part of Compare the Market Limited. Compare the Market receive a % of the commission that our partner London & Country earns. All applications are subject to lending and eligibility criteria.

L&C will not charge you a broker fee should you decide to proceed with a mortgage.

2. Choose a specialist mortgage lender

Many mainstream lenders shy away from the potential risks associated with someone who’s been bankrupt or has a bad credit record, but there are specialist lenders who may consider your mortgage application while bankruptcy still appears on your credit file.

3. Check your eligibility

Adverse lenders may impose additional eligibility requirements to protect themselves. These can include being discharged from bankruptcy for a certain period and having a clean credit record since your discharge (ie, not missing any repayments on outstanding credit).

4. Check your credit history and rebuild your credit score

Start to rebuild your credit score as soon as possible. Pay your bills in full and on time. Also look at your credit utilisation ratio – the amount of credit available to you that you’re using – and try to reduce it if possible.

5. Start saving for that big deposit

Open a savings account as soon as possible and start putting money away. Save regularly if you can.

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

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