How to Get a Mortgage After Bankruptcy in the UK: Your Complete Guide

If you’ve faced bankruptcy or have recently recovered from being bankrupt, then it might be difficult to imagine a world in which you can secure another loan, especially to achieve purchasing a property.

However, you’re not alone – and obtaining a mortgage after a bankruptcy is possible with the right approach. In fact, many people today successfully get a mortgage after bankruptcy.

But how do you get a mortgage after a bankruptcy?

In this complete guide, we’ll take you through everything you need to know about getting a mortgage with bankruptcy, including how long you need to wait, how to improve your chances, and what you can expect from lenders. Let’s jump in.

What is Bankruptcy?

Bankruptcy is a legal process that allows individuals who cannot financially repair their debts to make a fresh start. Crucially, there are restrictions put in place when an individual declares bankruptcy, and it is usually considered only as a last resort after all other debt solutions have been exhausted.

In the UK, bankruptcy typically lasts for 12 months. Crucially, however, the effect of bankruptcy can extend beyond this period, particularly in the context of securing a large loan such as a mortgage.

How Does Bankruptcy Affect Your Credit?

It’s no secret – being declared bankrupt will have a significant impact on your credit score.

Having any form of bankruptcy on your credit file will signal to lenders that you have previously struggled to manage your debts, making them more cautious when reviewing your mortgage application.

It is important to note at this juncture that having a previous record of bankruptcy on your credit file can also exclude you from some lenders, particularly high-street banks who typically follow  a strict lending criteria.

In short: Bankruptcy will affect, not only your eligibility for future loans, but also the terms and interest rates offered.

One of the most common questions we get asked is: “how long does bankruptcy stay on your credit file?”

In the UK, bankruptcy will typically remain on your credit report for six years from the date it was declared. As such, getting a mortgage after bankruptcy will take both time and patience.

It is a challenging task to secure any form of loan or credit during the period of bankruptcy, however, the longer you remain discharged and the sooner you can start improving your credit score, the more likely lenders will be to review and accept your application.

If you want to get a mortgage after bankruptcy, understanding how bankruptcy affects your credit and borrowing power is the crucial first step toward rebuilding your financial profile.

Can You Get a Mortgage After Being Declared Bankrupt?

Yes, while it is possible to get a mortgage after bankruptcy, it is important to understand that it will require time, planning, and the right lender.

Typically, getting a mortgage after bankruptcy will depend on several factors, including:

• How long ago the bankruptcy was discharged
• Your current credit score and financial habits
• Employment stability and income
• Size of your deposit

As we’ve touched on previously, many high-street lenders and banks will often have very strict lending criteria that could discount a mortgage application entirely, should there be any record of bankruptcy on the borrower’s credit file.

As such, if you’ve been declared bankrupt and are making strides towards returning onto the property ladder, it is best to work with a trusted whole-of-market mortgage adviser – like Boon Brokers – who can provide you access to a host of specialist lenders.

Specialist lenders help cater to those who do not align with the typical or strict criteria of other lenders, and as such, they are often more likely to be willing to work with individuals who are rebuilding their credit file.

It is worth noting that patience is key. The more time that has passed since your bankruptcy, the more options you’ll typically have. Lenders will want to see that you’ve regained financial stability, and while bankruptcy will naturally place your application in a higher risk category, it is best practice to prove that the bankruptcy was an isolated issue and not part of a pattern.

When Can You Apply for a Mortgage After Bankruptcy?

Technically, you can apply for a mortgage after your bankruptcy has been discharged by the court. This usually takes 12 months from the initial start date of the bankruptcy.

However, applying immediately after a discharge is rarely successful.

Simply, lenders will want to see an active change in financial patterns – that perhaps led to the initial bankruptcy – and to confirm that you now have a stable financial profile. It’s all about reducing the risk for the lender, and that takes time.

Most lenders will expect a waiting period, often between two and six years, before they will consider your application.

Notably, the longer you wait and the more you can improve your credit score, the better your chances of success. It is best practice to first focus on rebuilding your credit and demonstrating responsible financial behaviour, before applying for a mortgage after bankruptcy.

It’s also worth noting that applying for a mortgage after bankruptcy too soon can often result in rejections. As mortgage applications require a hard credit check of your file, this can further harm your credit score at a time where you need to only focus on improving your creditworthiness. Patience and preparation are key.

How Will Bankruptcy Affects Mortgage Interest Rates

Unfortunately, having a bankruptcy on your file will naturally place you in a high-risk category for lenders. As such, while it is still possible to secure a mortgage with a bankruptcy, it does also bring into play additional restrictions or things to consider.

For example, when you’re looking to secure a mortgage after bankruptcy, you should be prepared for higher interest rates, especially in the early stages.

Because lenders consider you a higher-risk borrower – due to your past financial difficulties – Mortgage interest rates after bankruptcy are typically above the standard market rate.

This is one of the ways in which lenders try to offset their risk. While the exact rates will be specific and unique to your particular application, factors that can affect your mortgage interest rate include:

• The time since your discharge
• Improvements in your credit score
• The size of your deposit
• Your overall financial profile

Recalling the key word ‘patience’, it is important to note that as your credit improves and more time passes, lenders will be more likely to offer you better and more competitive rates. However, it is best to understand and expect higher costs in the beginning.

How to Get Approved for a Mortgage After Bankruptcy

Securing a mortgage with bankruptcy on your credit file is a challenge – but it’s certainly possible.

If you’ve recently been discharged from a bankruptcy and are thinking about securing a mortgage, then the first and best thing you can do is to contact a trusted mortgage broker.

A mortgage broker will be able to advise you on the best ways to improve your application, lenders that are likely to accept your application, and how to secure the best interest rates that are available to you.

Here are the 5 key steps that can help boost your chances:

1. Contact a trusted mortgage broker: Speak to an expert mortgage adviser and discuss the options that are available to you, putting in motion a plan to move forward.
2. Improve Your Credit Score: Pay bills on time, use credit responsibly, and start to build a background of a strong creditworthiness.
3. Save for a Larger Deposit: A larger deposit will make your application more appealing to lenders.
4. Provide Proof of Stability: Having a steady job and consistent income will help show that you’re financially stable and a reliable borrower.
5. Wait for the Right Time: A longer gap since your discharge increases lender confidence.

Can a Mortgage Offer Be Withdrawn After Bankruptcy Approval?

The short answer: Yes, if any concerns arise regarding your financial history or stability, lenders can withdraw a mortgage offer, even after an initial approval.

During a mortgage application, lenders will complete a full assessment on your affordability and creditworthiness. If at any stage the lender uncovers additional details about your credit file, bankruptcy, or mortgage application that were not previously disclosed, it is likely your mortgage application will be withdrawn.

It is vital to be completely honest and transparent in any mortgage application, especially when looking to secure a mortgage with a bankruptcy recorded on your file. It is always best to disclose your financial past honestly and provide documentation where required.

Before any loan is signed off on, lenders will run final checks before the completion. This will put your creditworthiness in the spotlight, and any discrepancies or sudden credit issues will impact the offer.

Working with an experienced mortgage adviser will help reduce the risk of surprises during the underwriting process. Guiding you through the mortgage application from start to finish, a trusted mortgage adviser can ensure that you include all the necessary documentation that the lender requires.

How Long Will You Pay Higher Mortgage Interest After Bankruptcy?

The exact period of time that you’ll likely pay higher interest rates will wholly depend on your progress in rebuilding credit and the lender’s policies.

On average, you should expect to pay an elevated mortgage interest rate after bankruptcy for at least the first 2 – 3 years.

As you build up a track record of responsible borrowing, and your credit score starts to improve, you may be eligible to remortgage to a more competitive deal.

It is common practice for borrowers to reassess their mortgage options around the two-year mark post-bankruptcy. Working with a whole-of-market broker can help you find the most competitive interest rates tailored to your financial standing.

Most importantly, however, is that during this time, it’s essential to maintain all credit agreements, avoid unnecessary borrowing, and keep your financial records clean.

How Long Should You Wait Before Applying for a Mortgage After Bankruptcy?

We get it. Securing a mortgage and getting back into the property market can often feel like a smart and profitable way to help a fresh start, especially after a bankruptcy.

But while the desire to make quick decisions and get back on the property ladder can feel like a  strong pull, it is often a smarter move to wait.

Rushing into mortgage applications after bankruptcy will often result in higher costs, limited options, and possible rejection.

Our best advice is to consider waiting at least 2 – 3 years after discharge. During this time, start to:

• Build savings for a larger deposit
• Improve your credit score
• Stabilise your income and outgoings

The short and long of the truth is: the better your financial profile, the more favourable your mortgage options will be. While specialist lenders will often consider your application sooner, waiting for the right time could save you thousands over the life of the mortgage.

Partner With a Specialist Broker to Secure a Mortgage After a Bankruptcy

Getting a mortgage with bankruptcy on your record isn’t easy – but with the help of a trusted mortgage broker, it is certainly possible.

Here at Boon Brokers, our expert advisers have extensive experience supporting clients with complex financial histories – including those who have been through bankruptcy – or who don’t meet the traditional lending criteria.

As a fee-free and whole-of-market brokerage, we have access to a host of specialist and leading lenders, and can help you navigate the mortgage market to help secure a mortgage that matches your needs.

Contact Boon Brokers today and arrange a free consultation with your dedicated mortgage advisor to start your journey to homeownership today.