We understand that the sense of freedom, pride and independence that comes with owning your own home is priceless. Our brokers are frequently approached by individuals wanting to obtain a new mortgage after bankruptcy and enjoy all the benefits that homeownership offers. All types of bad credit can make obtaining a mortgage more complicated and bankruptcy is no exception. Some mortgage lenders will decline any applicants who do not have a perfect credit record, however there are lenders who will consider and approve applicants with more complex credit histories.
Although the road to securing a mortgage post-bankruptcy won’t necessarily be an easy one, it is still possible. Whether you have had a mortgage application denied by a mainstream lender or are just starting to explore the options available to you post-bankruptcy, here are some of the most important pieces of information that you need to know before you begin approaching lenders and submitting new mortgage applications.
How long will I need to wait to obtain a new mortgage after bankruptcy?
If you have experience of bankruptcy and are not sure whether you will ever be able to obtain a mortgage, you certainly are not alone. We have seen too many instances where potential homeowners simply have not been given any information on this topic, which has caused a lot of undue stress, worry and concern.
You cannot apply for any type of credit including a mortgage until your bankruptcy has been discharged. This will usually take around 12 months but it could be less depending on the decision made by the courts. When you have been discharged, you will likely find that most lenders won’t start to consider you as a trustworthy lending prospect for several years.
In terms of offering mortgages for discharged bankrupts, each individual lender will have its own set of criteria. Some lenders will consider applicants immediately after discharge but it is important to note that their criteria will be strict, you will need to have a sizeable deposit and the rates and fees will be markedly higher than those for other mortgage products.
The loan to value (LTV) ratios that lenders will be able to offer you will increase as more time passes between the date of your discharge and the submission of your mortgage application. Individuals who have been discharged for more than 5 years and have maintained a good credit history might well discover that they can borrow up to 95% LTV just like any other potential borrower. Individuals discharged for 2 years will almost certainly find the application process much more complex but, in most cases, will be able to obtain a mortgage provided that they can also put in a deposit of at least 25%.