Mortgage Eligibility Following Bankruptcy

At UK Property Finance we are regularly approached by customers who have questions concerning mortgage eligibility following bankruptcy. Contrary to popular belief, bankruptcy is far from an unusual eventuality in the UK. It is often assumed that bankruptcy immediately and permanently closes the door to getting a mortgage, but this isn’t necessarily the case. In fact, arranging a competitive mortgage following bankruptcy is perfectly possible.

Whether you’re ready to go ahead with a mortgage application or simply considering the available options, contact the team at UK Property Finance anytime for a free initial consultation.

Of course, arranging a mortgage after bankruptcy can be more challenging and complex than arranging a regular mortgage application. There are various factors that may affect your eligibility for a home loan which is why it’s important to make your initial enquiry as early as possible.

In this guide, we’ll be covering some of the most important and commonly asked questions on the subject of post-bankruptcy mortgage eligibility, such as:

• Can I qualify for a mortgage after bankruptcy?
• How quickly following bankruptcy can I qualify?
• What can I do to improve my chances of getting a mortgage?
• What’s the ‘Hunters Report’?
• How will my credit score affect my eligibility?
• Which banks and lenders should I apply to?
• Should I consider equity release to repay my debts?
• Does bankruptcy result in repossession?

As a 100% independent mortgage broker, we can help you assess your eligibility for a mortgage following bankruptcy. Irrespective of the nature and urgency of your case, we will provide the support you need to safeguard your financial future.

For more information or to get the process underway, contact a member of the team at UK Property Finance anytime.

Can I qualify for a mortgage after bankruptcy?

It is often assumed that qualifying for a mortgage after bankruptcy isn’t a realistic possibility. In reality, you have every chance of both qualifying and getting a good deal.

It is not uncommon for many major lenders to immediately exclude applicants who have a previously declared bankruptcy. Some mainstream lenders are more flexible than others, but it tends to be the UK’s specialist lenders that demonstrate maximum leniency where bankruptcy is concerned. If you would like to learn more about the specialist lenders that may be suitable for your application, contact a member of the team at UK Property Finance anytime.

Our team has helped dozens of people with a history of bankruptcy access competitive and affordable mortgages. We have successfully helped the following applicants among others:

• Clients with a bankruptcy discharge and a 10% deposit
• Clients with a history of bankruptcy and a 5% deposit
• Clients interested in remortgaging after bankruptcy
• Clients who have had their homes repossessed
• Clients with a bankruptcy discharge from 1 to 6 years ago
• Clients with a bankruptcy discharge and a large deposit

Each case is unique and must be considered by way of individual merit. During your obligation-free consultation, we will make an assessment as to your eligibility for a mortgage and help you choose the best possible way forward.

Call UK Property Finance anytime for more information.

How quickly following bankruptcy can I qualify?

This is a difficult question to answer given how all lenders have individual rules and policies however in essence the more recent the bankruptcy the lower is the likelihood of your mortgage application being accepted. By contrast, if you declared bankruptcy many years ago there’s a much stronger chance of qualifying for a competitive mortgage.

In most instances, it is extremely difficult or impossible to qualify for a mortgage before your bankruptcy has been discharged. This is typically 12 months following the date bankruptcy was declared however that may be reduced at the discretion of the courts. Nevertheless, it may still take some time following discharge before most lenders are willing to consider your application.

It is also worth remembering that the more recent your bankruptcy and/or discharge, the more likely you are to pay a premium price for your home loan. You may also be expected to provide a much bigger deposit and meet extremely strict criteria to qualify.

As time passes, you will find more lenders willing to consider your case. For example, if you were discharged around four or five years ago, and you have an excellent credit score since then you may be able to qualify for a mortgage of up to 90% LTV like most everyday applicants. You could also gain access to standard interest rates and borrowing costs. By contrast, if you were discharged less than two years ago, you may find it difficult to qualify for more than 75% LTV and with somewhat elevated overall borrowing costs.

The following table provides a brief, but by no means conclusive overview of your approximate likelihood of qualifying for a mortgage in accordance with how long you were discharged from bankruptcy:

None of this information in the table is to be taken literally as there are other factors that will also play a role in determining your eligibility or otherwise. As a rule of thumb however your likelihood of qualifying increases with time as does the likelihood of accessing a competitive deal.

For more information on eligibility or to discuss your case in more detail, contact a member of the team at UK Property Finance anytime.

What can I do to improve my chances of getting a mortgage?

However recently you declare bankruptcy there is much you can do to boost your chances of qualifying for a mortgage. The most important and effective of which are:

1.  Check your credit score

It is essential that you know where you stand in terms of your credit history and understand the significance of your credit score. If your credit history is not good, it could stand in the way of you qualifying for a mortgage. Repairing credit score damage isn’t something you can do overnight, but it is something you should start trying to resolve as quickly as possible.

2.  Offer a bigger deposit

Bigger deposits can open the door to a wider range of lenders and more competitive mortgage deals. In addition, you are also far more likely to be considered eligible in the first place if you are willing and able to offer a sizeable deposit. This may mean having to wait and save longer before applying for a mortgage however it could be worth it.

3.  Consult with a broker

Rather than approaching lenders directly it is advisable to contact an independent broker such as UK Property Finance. A broker should have the contacts and can help assess your eligibility or otherwise for individual lenders before applying. In addition, working with a broker can help protect your credit score from the damage caused by submitting multiple applications.

If you have any questions or concerns regarding your credit history or eligibility for a mortgage, contact UK Property Finance anytime either online or by telephone, or we can meet face to face.

What Is the Hunters Report?

If you were discharged from bankruptcy more than six years ago and have an excellent credit history, you should be in a position where you can apply to most mortgage lenders in the normal way. Your application will most likely pass the bank’s initial checks, but may be rejected at a later stage. If this happens, you may have fallen victim to the Hunters Report.

As well as being an anti-fraud data sharing system, the Hunters Report is also a database of every person who has ever been declared bankrupt in the United Kingdom. This includes individuals who were discharged more than six years ago, after which the history of bankruptcy should technically no longer be relevant. Unfortunately, the majority of mainstream lenders continue to consult the Hunters Report as a way of accepting or rejecting mortgage applications.  This means that even if everything else is in order, you may be declined due to an historic bankruptcy on your file.

Unsurprisingly, this amounts to an extremely difficult and frustrating situation for many applicants. You will be given an initial indication that your application has been accepted only for it to be rejected further down the line and quite often lenders will use data protection guidelines as a reason for not providing you with the exact reason for rejection. Again, this is why it is a good idea to consult with an independent broker, prior to submitting your application.

As your history of bankruptcy will be indicated on the Hunters Report, you need to be strategic with the lenders you target. Contact a member of the team at UK Property Finance anytime for more information.

How will my credit score affect my eligibility?

Any credit problems you had prior to bankruptcy will normally stay on your credit file for 6 years from being registered, whether settled or not however in certain circumstances they could in fact be erased. This is one of the somewhat unexpected ‘benefits’ of bankruptcy as your credit score can be reset to zero and all defaults, arrears, CCJ’s and so on are wiped from your record. You will be unable to access almost all credit for the first year after which you can then start attempting to build your credit score.

Any credit issues however that occur following bankruptcy can cause severe and ongoing problems. Being declared bankrupt in the past and then proving that you now have a more stable and responsible financial path is something that is appreciated by lenders. By contrast, continuing to struggle with debt and credit score issues after bankruptcy will make you seem in the lenders eyes as being an extremely high-risk applicant.

In the aftermath of bankruptcy, it is absolutely imperative that you avoid credit score damage at all costs. Even the slightest blemish following bankruptcy can have major immediate and long-term implications.

If you have any questions or concerns whatsoever regarding your credit score, contact a member of the team at UK Property Finance for a free initial consultation.

Which banks and lenders should I apply to?

It is impossible to recommend any specific banks or lenders, without first considering your case as it stands. Your eligibility or otherwise will be determined by when you were declared bankrupt, your recent credit history, your financial status, your income, how much you can afford to provide by way of a deposit and so on. We would need to establish these and other details, in order to direct your application to the most appropriate lenders.

Nevertheless, we strongly advise against taking your application directly to any mainstream mortgage company. Not only is it highly likely that your application will be rejected, but additionally you risk damaging your credit score at the worst possible time.  Consult with the experts at UK Property Finance anytime to establish which lenders are most suitable for your requirements and your budget.

Can I get a buy to let mortgage after declaring bankruptcy?

Once again, your eligibility or otherwise for a buy to let mortgage will be determined by a multitude of factors.

For the most part it is a case of demonstrating that you and the project are a strong financial prospect in order to afford the monthly loan repayments whilst at the same time offering a sizeable deposit and having a decent recent credit history. As with all mortgages, the date of your discharge will also influence your eligibility for a buy to let mortgage.

As a rule of thumb, the following criteria should normally be met:

• An available deposit of at least 15%
• Discharged no less than one year ago
• An acceptable credit history since bankruptcy
• Ownership of at least one additional property
• A good financial position

Call UK Property Finance anytime if you are interested in applying for a buy to let mortgage after declaring bankruptcy.

Should I consider equity release to repay my debts?

Equity release is something that should be considered extremely carefully and is age and criteria dependent so certainly not for everyone. It is however perfectly suitable for repaying bankruptcy debt which potentially could completely remove all traces of bankruptcy from your financial history subject to receipt of an acceptable court order. This is a process known as annulment, which can be enormously beneficial if handled correctly.

If there is the option of using the equity tied up in your property to repay your debts, it is definitely worth considering. Nevertheless, it is a move that should be approached with extreme caution, under the advisement of an independent expert. Successively reaching an annulment can be complex and time-consuming, although it is perhaps the single most agreeable way of reversing the negative implications of bankruptcy.

If you are interested in using the equity in your home (or any other property) to repay your debts, book your free and no obligation telephone or face to face consultation with the team at UK Property Finance anytime.

Does bankruptcy result in repossession?

All cases of bankruptcy are different, as are the potential consequences of being declared bankrupt. As such, there is a possibility that your home may be repossessed if you file for bankruptcy. Nevertheless, there are various options to explore to prevent this from happening.

Repossession doesn’t typically occur as part of the bankruptcy process, but your mortgage lender may take possession of your home if you have fallen behind on your monthly mortgage repayments. For obvious reasons, you will not be able to hide the fact that you have declared bankruptcy to your mortgage provider however it is possible to delay or even prevent repossession from occurring, depending on a variety of factors. Some examples would include dependents or family members living in the property with you, having negative equity in your home or not being the sole owner of the property.

If you have declared bankruptcy or are considering doing so, it is worth speaking to your mortgage provider as early as possible to discuss what happens next. Rather than waiting until the last moment it is normally advisable to come clean and request their advice at the earliest possible stage.

FCA disclaimer:

Please note that the UK Property Finance website provides information for reference purposes only and which at the time or writing was believed to be correct however under no circumstances should this information be interpreted as formal legal or financial advice. We are only able to provide expert financial support and suggestions upon discussing the individual requirements of the clients we work with. We cannot and do not guarantee the completeness, accuracy or relevance of the information published on the UK Property Finance website which is subject to change at any time and without notice. If you require financial advice and support of any kind, please book your free initial consultation with a member of the team at UK Property Finance anytime.

*The information contained above is relevant and correct for 2019/20, at the time of writing; 11/2019.