Mortgages for Discharged Bankrupts

If you’ve been declared bankrupt in the past, this doesn’t have to mean the end of your dreams of owning a home. Many people assume that bankruptcy means that you’ll never be approved for a mortgage, and while it might be more difficult, it isn’t impossible. We regularly hear from customers who have been declined from their first mortgage application and are quick to assume that the search ends there. However, we’re pleased to say that it isn’t an uncommon situation to be in and there are ways to find a mortgage after bankruptcy.

This type of mortgage might be trickier to set up and you might have to jump through more hoops than the average mortgage applicant. However, it can be done. Once you have satisfied a lender that you aren’t high risk, you will be treated like any other lender. And once you have a mortgage, this can help you to secure other types of credit and start building up your credit report even further. So, if you’re dreaming of owning your own home or want to invest in a buy-to-let property following bankruptcy, don’t give up yet.

What is bankruptcy?

If you are struggling to pay back your debts you can apply for bankruptcy. If you owe over £5,000, your creditors can also apply to make you bankrupt, even if you don’t want them to. Bankruptcy is a legal status that allows you to make a fresh start after 6 years. However, it isn’t something that should be taken lightly. If you declare yourself bankrupt, you may have to continue paying your debts for up to 3 years. You can also have your property seized in order to pay back your debts. If you have been made bankrupt, some occupations won’t allow you to work again, and in many cases, it can be more difficult to secure credit.

As with any type of poor credit, bankruptcy can make you feel like you are on a blacklist of borrowers. The good news is that more and more lenders are committing to help those with poor credit get back on their feet, even those who have been declared bankrupt. If you’re trying to get a mortgage following bankruptcy, this article should help to clear up some of the common misconceptions surrounding mortgages for discharged bankrupts, including:

Mortgages for discharged bankrupts from 1-6 years ago
Securing a mortgage with a history of repossession
Securing a mortgage with bankruptcy and a small deposit of 10-15%
Securing a mortgage with a 5% deposit
Mortgages for discharged bankrupts with a large deposit
But to let mortgage for discharged bankrupts
Remortgaging following a discharged bankruptcy
Bankruptcy annulment and mortgages

How long do I need to wait after bankruptcy before I can get a mortgage in the UK?

Many people assume that they won’t be eligible for a mortgage after being declared bankrupt, but this is rarely true. While you will have to wait until you are discharged before applying, this can be as little as 12 months and even less depending on the court’s ruling. Once you have been discharged, you will then have to focus on rebuilding your credit and ensuring that you look trustworthy in the eyes of lenders again. During this time, you might assume that not taking on any more credit is a wise mood, but this might actually be counterproductive. In reality, you need to show lenders that you are capable of making payments regularly and on time.

In terms of a mortgage application, the amount of time you wait between your discharged bankruptcy and applying will have a huge impact on your eligibility and the amount of deposit required to move forward.

The longer you wait, the lower the deposit you will need and the fewer restrictions that will apply to your application. If you have a good financial contact for 4-5 years following bankruptcy, you might find that you are able to borrow 90-95% of the value of a property just like any other borrower. Even those who have only been discharged for 12 months may find they are eligible for a mortgage with a 25% deposit.

The table below shows typical eligibility for discharged bankrupts seeking a mortgage. As you can see, the longer you leave it before applying, the more likely you are to be able to secure a mortgage with a smaller deposit.

Can I get a mortgage if…?	Declared bankrupt	Bankruptcy discharged	Eligibility	Deposit required
I’m just bankrupt	0 years ago	0	No	N/A
Bankrupt 1 year ago	1 year	0	Low	At least 40%
Bankrupt 2 years ago	2 years ago	1	Low	At least 25%
Bankrupt 3 years ago	3 years ago	2	Low	At least 25%
Bankrupt 4 years ago	4 years ago	3	Med	At least 15%
Bankrupt 5 years ago	5 years ago	4	High	At least 10%
Bankrupt 6 years ago	6 years ago	5	High	At least 5%
Bankrupt more than 6 years ago	6+ years ago	6+	High	At least 5%

Please note that this information can change regularly so you should always consult with a mortgage advisor before making any financial decisions related to mortgages. During times of political uncertainty, lenders might be less willing to lend and those who are considered high risk are often the first to be rejected.

The table above doesn’t guarantee that you will be given a mortgage if you were made bankrupt 6 years ago and have a 5% deposit. Many other factors go into the decision-making process and the time that has elapsed since your bankruptcy is only one of them. If you have a poor credit file, for example, and have done little to rebuild your credit, you might find it more difficult to get a mortgage. However, if you have been responsibly working towards building your credit, you may find you can get a mortgage much sooner.

Here is an infographic we put together to break all stages down in a visual way.

How do I give myself the best chance of having my mortgage approved after bankruptcy?

Bankruptcy doesn’t have to mean the end of the road for your chances of owning your own home or even purchasing a buy-to-let property. If you’re serious about getting your finances back on track, there are steps you can take to start building your credit again. Once your bankruptcy is discharged, you will find it more difficult to get credit, so you should essentially start from the beginning. Follow these steps to building your credit following bankruptcy…

1. Check ALL credit reports and make corrections

There are three main credit reference agencies in the UK and they all have a different system for generating your credit score. Before you can decide if you’re ready to take out a mortgage, it’s important to get a complete picture of how each of these credit checking agencies views your profile.

It’s impossible to know which credit checking agency your mortgage provider is using, and some will use an amalgamation of all three in order to generate a more complete picture. If you don’t have access to the same information, it’s difficult for you to know when you are ready to make your application.

It’s also very common for mistakes to appear on your file following bankruptcy. You might also see some closed accounts still showing late balances, or defaults still cropping up on your file. If you see a mistake on your credit report, you can query this with the company and request that it be updated. It’s not uncommon for individuals to be declined credit because of mistakes on their credit report, but they will assume that it is because of their bankruptcy.

2. Check if you are eligible for a mortgage

Once your credit report is up-to-date, you can then inquire with a mortgage expert to find out if they believe you would be eligible to apply. They are used to working with people from all different financial backgrounds, so don’t assume that they won’t work with you because of your bankruptcy.

3. Rebuild your score until you are eligible

If your advisor recommends that you wait a while before applying for your mortgage, use this time to rebuild your credit score further. A simple way to do this is by making sure you meet your monthly payments on a credit card or overdraft. If you are struggling to get credit because of your history with bankruptcy, you can apply for a credit card specifically for people with poor credit. Use this for small transactions throughout the month and pay it off in full at the end of the month.

What if I have credit issues before or after bankruptcy?

Any credit issues from before your bankruptcy should be wiped out and not pose any further problems. So, if you had late payments, mortgage arrears or CCJs, this should be removed from your credit report once you have been discharged. This usually takes place one year after you have declared bankruptcy.

However, if your credit issues continue after your bankruptcy, this is likely to be seen an unfavourable to lenders. Mortgage providers will already see you as a high-risk customer, and if you have failed to bring your financial situation into line by continuing to make late payments then this might lead to your application being declined.

This is another reason that it is important to keep an eye on your own credit report. Mistakes left on your report could appear to lenders as new credit issues when in reality they should have been expunged from your record following the bankruptcy.

Time heals most things on a credit report, so if you faced issues immediately after your discharge but have improved your credit over a period of 6+ years, these are unlikely to have an impact on your record.

Where can I get a mortgage after bankruptcy?

There are currently around 20 mortgage providers who will accept applications from discharged bankrupts. They all have their own rules and regulations for who can apply and how long they need to wait after being discharged before applying. As outlined above, there are no guarantees when it comes to applying for a mortgage following bankruptcy.

Mortgage providers will consider many different factors when making a lending decision. The best way to find the right mortgage provider for you is to speak to an experienced mortgage advisor with knowledge of mortgage for discharged bankrupts.

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

Buy-to-let mortgages are some of the hardest to come by, but it is possible to secure a buy-to-let mortgage following bankruptcy. You will need to meet much stricter criteria, usually the following:

Be discharged for at least 3 years.
Have a clean credit score since your discharge
Secure at least a 15% deposit, sometimes even more
Own at least one other property
Have some personal income. There is no minimum income threshold, but you will need to have some income either from employment, self-employment or retirement

Can I use the equity in my home to remove bankruptcy debt?

This is a seldom used route but highly effective in removing bankruptcy from your file. If you are able to pay off the bankruptcy debt within a timeframe set out by the courts, you could secure something known as an annulment. This effectively wipes your credit score clean without resorting to bankruptcy and the discharge period.

Your eligibility for an annulment will depend on how you accrued your debts. For example, if you were forced into bankruptcy by HMRC for failing to pay a tax bill, you could use a secured loan against your home to clear any debts and halt the bankruptcy. This would leave your credit report unscathed and allow you to remortgage your home further down the line.

If you are forced into bankruptcy because of multiple debts, securing a loan to clear off your debts is going to be difficult. However, with a specialist second charge mortgage, you could avoid the bankruptcy process.

Conclusions

As outlined above, there are many options for those dealing with a bankruptcy who want to get on the property ladder. You could use a secured loan against your home to halt the bankruptcy proceedings. Or you can bide your time following bankruptcy and spend the time building your credit report.

Bankruptcy doesn’t have to mean that you can never get a mortgage again. Instead, it simply means that you will need to be wise to the companies that work with discharged bankrupts. A declined application doesn’t have to mean that you cannot get a mortgage, you might simply need to work on building your credit and allow more time to pass.

If you’re not sure how to proceed with your mortgage application, speak to a specialist mortgage advisor. They will be able to look at your situation and decide if you are ready to make an application or tell you what steps you need to make to get your credit report in line. Approaching the right mortgage provider to secure your agreement in principle can give you the confidence to start your search for the right property.

It might be more difficult to secure a mortgage for discharged bankrupts, but it isn’t impossible, so don’t give up!

Can I Get a Mortgage With a CCJ?

A lot of people assume that a CCJ is the end of the road for their finances. CCJs are so feared because many people assume it will land them on some sort of mortgage blacklist and will prevent them from ever getting on the property ladder. The good news is that none of this is true, and even those with a CCJ on their record can often find a way to secure a mortgage.

Finding a mortgage is a headache for anyone, but when you have an adverse credit history, the process can get even more complicated. However, it isn’t impossible to get a mortgage with bad credit, even if you have a CCJ on your record. There are companies that specialise in adverse credit mortgages. A mortgage advisor will be able to help you to find a lender that matches your profile and is, therefore, more likely to accept your application.

More and more lenders are opening up to the idea of approving mortgages for individuals with CCJs. Since a CCJ is just one factor on your record, many lenders are now choosing to look at the bigger picture rather than focus on one component. Every lender will have their own limits as to what they consider to be acceptable, so if you’re ready to put your CCJ behind you and start building your credit profile again, there’s no reason you won’t be able to.

What is a CCJ?

A County Court Judgement, or CCJ, is a type of court order in England, Wales, and Northern Ireland. They are registered against individuals if they fail to repay money that they owe. A CCJ is often the last resort for lenders and it won’t come out of the blue. If possible, you should always work with lenders to find a solution to the problem before a CCJ is registered.

If you pay off the full amount within 30 days of receiving notice of your judgement, you will avoid it being entered on your credit score. Once on your credit report, it will stay there for six years, even if you pay it off in this time. Lenders look at your credit report when making lending decisions and a CCJ on your report can make them less likely to lend you money.

So, how do I get a mortgage with a CCJ?

When making a lending decision, mortgage providers aren’t just looking to punish people with bad credit. They are tasked with finding out about your financial history and using this information to make a decision about the likelihood that you will be able to pay back your mortgage. Having a CCJ on your record isn’t ideal, but it isn’t the end of the story. In general, a mortgage provider will consider the following factors…

Date of the CCJ

The date of the CCJ is perhaps the most important thing that a mortgage provider will consider. If your CCJ was over three years ago, it will be far easier to get a mortgage than if you have had a CCJ registered in the past 12 months.

The date that the CCJ is settled it also of relevance to lenders. Some do not require the CCJ balance to be settled while others will require it to be settled in full for at least 12 months before making a mortgage application.

The amount on the CCJ

The size of the CCJ is another important factor that mortgage providers will consider when looking at your application. Some lenders will have their own limits as to what they consider to be the maximum allowable size for a CCJ. They will weigh the size of the CCJ against things like your deposit and how recently the CCJ was registered.

For example, if the CCJ is over three years old, then most lenders won’t take the size of the debt into consideration. If the CCJ was registered in the past 2 years and are applying for a mortgage of 85% of the total property value, then the maximum CCJ allowable would be around £2,500. A CCJ in the last 12 months should be no more than £1,000.

There are some lenders that will consider higher values, but they will require you to have a higher deposit amount.

Borrowing required

If you have a healthy deposit, then you are more likely to be eligible. Essentially, the most deposit you have, the better your chances.

With a 25% deposit, you could still secure a mortgage even if you have a CCJ registered in the past 12 months.

Number of CCJs

Leaders won’t just look at the amount on the CCJ but also the number of CCJs you have. A single CCJ is less of an issue than 2, and most lenders won’t consider those with more than 2 CCJs registered in the past 2 years.

Lenders are looking for indicators that you could be a high-risk borrower and also want to ensure that your mortgage is affordable.

Is the CCJ repaid?

Most people don’t realise that you can still get a mortgage, even if the CCJ remains unpaid. An unsatisfied CCJ doesn’t automatically mean that lenders will rule you out for a mortgage. Paying off might give you wider access to more lenders, but there are still some lenders that will consider your application, even if the CCJ remains unpaid.

Sometimes, retaining the money for a bigger deposit makes more sense than paying off the CCJ.

The type of mortgage

There are many different types of mortgage and the kind that you choose could impact your eligibility for a mortgage. A standard purchase mortgage offers the best chances of success with a CCJ on your record. Likewise, a remortgage application is likely to be accepted provided you meet the other requirements such as a healthy deposit and regular income. A secured loan against an existing property offers some of the best chances of success for an applicant with a CCJ.

If you are applying as a first-time buyer, the lender might have further restrictions for applicants with CCJs. For example, they might want to see evidence of satisfactory rental payments or they might place a limit on the CCJ amount of around £1,000.

Buy to let mortgages are perhaps the most difficult to access with a CCJ, but again, it isn’t impossible. In most cases, the lender will require a much larger deposit, or they might make you wait for longer than with a residential mortgage.

Your whole credit profile

A CCJ is an indicator that one or more of your loans went unpaid. Lenders recognise that it’s easy to get into financial trouble and that people shouldn’t be punished forever for falling behind with payments. This is why most lenders will look at your credit profile as a whole when making lending decisions. Late payments in the past 2 years can be overlooked if you have a healthy deposit of above 15%. More severe issues such as IVAs, repossessions or bankruptcy can be a lot more problematic.

When shopping around for a mortgage, it helps if you have a complete picture of what situation you are in. Download your credit file from the three different UK credit referencing agencies so that you have a complete overview of how lenders look at you. If you only had one credit account and this resulted in a CCJ, it’s important that you start building up your credit as soon as possible. Lenders want to see a track record of you making payments on time. Time can heal most issues on a credit report, so the sooner you start demonstrating that you can be responsible with money, the better.

Affordability

Above all else, lenders look at the affordability of the loan. They want to make low-risk lending decisions and so they want to lend to people who can afford the repayments. They will look at your income, your existing commitments and make a decision on how much they are willing to lend. Most high street mortgage providers will offer around 5x your annual salary, but when you are working with more niche mortgage providers, this might be reduced to 4x your annual salary.

Check your eligibility for a mortgage with a CCJ

The following table outlines the different conditions and considerations that lenders take into account when making lending decisions. As you will see, a higher deposit means that a CCJ will have less impact on a lending decision. Likewise, time can help to heal most issues with your credit.

Lender	LTV*	Date of CCJ	Date paid off	Other factors
1	95%	All CCJs over 3-year’s old ignored. Declined if registered in last 3 years.	Does not need to be repaid.	No other adverse credit history. Occasional late payments permitted.
2	85%	2 allowed in the last 2 years. No more than £1000 in the past year and up to £2,500 in past 2 years. Ignored after 2 years.	Does not need to be repaid.	Maximum of 2 late payments per month and 2 defaults permissible. No other adverse credit history.
3	80%		Does not need to be repaid.	Maximum of 2 late payments per month and 2 defaults permissible. No other adverse credit history.
4	75%	No defaults in the last year.	Does not need to be repaid.	Only considers adverse credit history from the past 12 months.

*Maximum loan to value

As you can see from the table, different lenders will approach CCJs in very different ways. The theme that links all of these situations is that a CCJ doesn’t have to mean the end of the road for your mortgage application. You don’t even have to wait six years for it to be removed from your record if you have a healthy deposit and your credit report is otherwise clean.

When shopping around for a mortgage provider that will accept CCJs, it’s important to shop around just as you would with a regular mortgage. There are plenty of niche mortgage providers out there that will still consider your application, so don’t assume that you can’t get a mortgage if your first application is rejected.

Building your credit with a CCJ

If you need to work on building your credit up following a CCJ, there are a few simple steps you can take to speed the process along.

It can be difficult to apply for new credit cards and bank accounts with a CCJ, so focus on the ones that you have. Try to always remain within your credit limit and don’t use more than 50% of your credit allowance at any one time.
Focus on making payments on time and building up a track record of good behaviour on your accounts.
If you have a credit card, use it wisely. Paying off your credit card in full every month is an excellent way to build your credit score. Use your card for everyday payments such as food shopping and transport and then pay it off every month.
Make sure everything is up-to-date, including your address details and your open accounts. Leaving accounts open at old addresses is a red flag for many lenders, so make sure everything is paid off and then closed.
Query anything that doesn’t look right. It’s not uncommon for people to be landed with additional CCJs for small amounts, such as old phone bills that weren’t disconnected properly. You might not even be aware of these if the registered address isn’t up-to-date. If something on your credit report looks wrong, don’t be afraid to query this with the company and ask for written confirmation if something is wrong.

While CCJs on your record might not be ideal, it doesn’t mean that you can’t get a mortgage so you should never give up. Work on building your credit and ask for help from the right people if you are serious about getting a mortgage.