Getting a Mortgage After Bankruptcy

Anyone who is looking to buy a house should frequently check their credit report from all 3 major agencies: Equifax, Call Credit and Experian. The data each agency has can differ, so it’s extremely important that you pay attention to detail and fix any mistakes that could stop you from being able to get a loan.

It's not uncommon for credit files to show inaccurate discharge or settlement dates, which is mainly due to an error from the credit reference agency. If left unchecked, this can cause eligible borrowers to be turned down for a mortgage by lenders because it looks like there are new defaults or outstanding balances on the file. However, this is easily fixable and shouldn't stop you from getting your property.

If you're looking to get a mortgage after bankruptcy, one of the best things you can do is start rebuilding your credit score. This can be done by keeping your credit balances low and making all of your bill payments on time - even settled defaults can affect your ability to get a mortgage. To improve your credit score, you should also make sure you're on the electoral roll and that there are no errors on your credit file.

Remember, each year that goes by reduces the impact your prior bankruptcy experiences could have on your application, which means that your future lender will be able to give you better terms, rates and fees. It may be frustrating to have to wait but using this period to rebuild your credit report's health can help you get a good mortgage in the future.

It's important to avoid taking on any new debt before applying for a mortgage after bankruptcy. This includes things like underpaying your credit card or getting into an overdraft, as well as taking on any type of loan. Lenders will want to see that you're capable of managing your finances responsibly and taking on more debt can make it look like you're not in control of your finances.

Any dent in your credit score caused by new debt will make it harder to get a good mortgage after bankruptcy. Even if you're tempted to take out a loan to buy a new car, it's important to hold off until you’re in a better situation financially.

If you're approved for a mortgage soon after bankruptcy, it’s likely that you’ll require an adverse credit lender and therefore be offered a higher interest rate.

This means that you'll need to budget for higher monthly payments, perhaps by reducing your expenditure. The lender will consider what you can afford to borrow and pay each month when they work out your affordability.

Try to close any unused credit accounts as soon as possible. In addition to how much you currently owe creditors, lenders will also investigate how much credit is available to you. Lenders usually prefer seeing fewer managed credit accounts over multiple active but unused ones. This could include things like store cards or credit cards with low limits that you never use. By closing these accounts, you can show lenders that you're no longer using credit excessively and that you're in control of your finances.

Generally speaking, you'll benefit from waiting a few years after being discharged from bankruptcy before applying for a mortgage. You may also want to consider waiting longer than a few years to give yourself more time to rebuild your credit score and secure better mortgage rates. The higher your credit score is, the better mortgage terms you'll be offered. So, even if it takes a little longer, it's often worth waiting to get a better deal on your mortgage.

It's unlikely that you'll be approved for a mortgage with a high street lender if you've recently been through bankruptcy within the last 5 years. This is because most high street lenders have strict criteria when it comes to approving mortgages and they're often not willing to lend to people with bad credit. Applying for a mortgage with traditional high street lenders and being rejected will not only waste your time and money, but it can also damage your credit score. This is why it’s best to speak to a mortgage broker like John Charcol who can direct you towards suitable lenders (high street or subprime) with criteria that aligns with your situation.

Each lender has different standards when it comes to lending money to people with bad credit. If you're looking to get a mortgage after bankruptcy, you'll need to find a lender that's willing to work with you. There are a number of specialist lenders in the UK who help people with bad credit get mortgages and the good news is that an independent mortgage broker like John Charcol can help you find one.

In fact, a lot of subprime/adverse credit lenders will only consider applications through intermediaries like John Charcol, which means that by not using a broker, you’ll miss out on potentially better rates and deals.

At John Charcol, we work with a huge range of high street and specialist lenders who are willing to lend to people with bad credit, so we can help you find the right mortgage for your needs.

You may be surprised to find out that you're eligible for a mortgage with better terms than you thought possible.

Get in touch with us on 0330 433 2927 to find out more.