Can You Get A Mortgage Following Bankruptcy?

Different lenders and mortgage brokers tend to have their own sets of criteria when it comes to the people they choose to offer mortgages to, and which financial circumstances are weighted more than others in terms of priorities and causes for concern.

This is why some lenders and brokers will provide mortgages for buy-to-let property or second homes whilst others do not, and also why some providers are more willing to lend to people who are self-employed compared to others.

However, one of the most difficult circumstances in which to get a mortgage is following a bankruptcy judgment, where a person’s assets (outside of household objects and necessarily business-related items) are taken by creditors in order to pay off debts as much as possible.

Some debts are not discharged through bankruptcy, which includes mortgages, which typically lead to a home being repossessed, typically sold and any of the proceeds go towards paying the outstanding amount on it.

However, the aftershocks of bankruptcy can be felt even if you did not initially have a home that was repossessed, and in the past made it extremely difficult if not outright impossible for many people who had declared bankruptcy to ever own a home again.

Is this still the case? Not quite, but it is still not an easy process.

Why Does A Bankruptcy Make It Difficult To Get A Mortgage?

There are typically three stages to bankruptcy, and each has different challenges when it comes to getting a mortgage.

There are people who have been declared bankrupt but have not had their debts discharged, people who have completed the bankruptcy process but still have it on their credit file, and people who have passed the six-year mark but still have a history of having declared bankruptcy.

The first stage, which also includes County Court Judgments (CCJs) and Individual Voluntary Agreements (IVAs) is practically impossible to get a mortgage during, as there are strict limits to 

the types of borrowing you can accrue and few lenders will even consider lending to someone who had just declared they cannot pay.

The second stage, where the warning is still on file, often leads to risk issues. Lenders will see a bankruptcy on your credit report and be wary of lending due to the fears that the money will not or cannot be paid back,

In the third stage, the concern is less about history or legal restrictions but more about credit rating. For lenders who determine their applications based predominantly on credit score, bankruptcies can be utterly devastating to the prospect of getting a mortgage on favourable terms.

Is The Outlook Completely Bleak?

Whilst it can be despairing to try and get a mortgage through conventional lenders following a bankruptcy, even after you have done the near-decade of work to build up your credit score again, there are always options for getting mortgages.

Some brokers specialise in helping people with bad credit, CCJs, IVAs and bad credit get mortgages on the best possible terms, working with lenders and borrowers for the best possible result.

Outside of this, building up your deposit always helps to lower bills and interest if you can afford to do so.