In This Article
What is a discharged bankrupt person?
A discharged bankrupt is a person that was ordered bankrupt in court and is now being released from the order.
This is usually 12 months afterwards. When a person has been discharged from their bankruptcy, they can begin to get their financial life back into shape.
Although they will no longer be under the restrictions of the bankruptcy, this does not mean that it will have an effect on finances going forward.
When there are new creditors involved, a person’s past bankruptcy will have a large effect on what they will be able to borrow, due to the creditor’s appetite for their business.
This does not mean to say that they will not be able to get credit, but it may mean that a specialist company is needed that specialises in this type of application.
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Can a discharged bankrupt person get a mortgage?
A discharged bankrupt person can get a mortgage, depending on the lender’s criteria around bankruptcies.
Some lenders may rule that a person that has been bankrupt in the past will not qualify for one of their mortgage products.
Fortunately, there are many lenders in the mortgage market so there may still be options.
Lenders will have different rules around when the applicant must have been released from the bankruptcy.
For instance, a common time frame is 5 to 6 years from the discharge before a prime lender will consider the application.
This is not the case of all prime lenders, and some may be willing to offer a mortgage sooner if the rest of the case remains strong.
For example, if income multiples are on the low side, with recent credit being clean and a low loan to value.
There are also specialist lenders that specialise in applicants with bad credit.
They may be able to consider a discharged bankrupt person for a mortgage within a shorter time frame, for instance, 2-years from discharge.
Lenders change their criteria on a regular basis, so you should talk to an experienced mortgage adviser with a background in adverse credit.
They will be able to take full details of your bankruptcy, looking at the date it was entered into, the date of a discharge, your current credit now, and the circumstances around where it occurred in the first place. With this information, they may be able to find you a lender accordingly.
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Could a discharged bankrupt person get buy to let mortgages?
A discharged bankrupt person could still get a buy to let mortgage after bankruptcy depending on when they were discharged, and meeting the rest of the lender’s criteria.
For instance, if you were looking for a mortgage with a high street lender, that generally lend to people with clean credit, they may need a significant amount of time to have passed since the discharge, such as 6 years.
There are also specialist lenders that offer buy to let mortgages which may be able to help discharged bankrupt applicants, within a shorter timescale.
Buy to let mortgages are underwritten based on the expected rent that a property will generate. However, income is still important as lenders need to be sure that they will be paid.
As a result, they will need to understand your full credit situation, and if you have been bankrupt, the details around this.
You should look for a mortgage adviser who arranges buy to let mortgages for applicants with bad credit.
They will be able to get a full understanding of your situation and look for a lender accordingly.
Will a discharged bankrupt need a specialist lender?
Whether or not a specialist lender will be required for a discharged bankrupt applicant will depend on the lender’s individual criteria and when the bankruptcy took place.
For instance, if someone has been discharged from bankruptcy for 6 years, had no financial issues since this time, and their credit score is high, they should have options like anybody else.
It will still mean meeting lender’s criteria in terms of loan to value, income, outgoings, indebtedness, the property, deposit source and more.
If satisfactory, there is no reason why a high street lender cannot be considered for a discharged bankrupt person.
If the applicant’s credit file was still reflecting poor credit due to a recent bankruptcy, or they have only recently been discharged, this will limit options.
There are, however, lenders that specialise in people with adverse credit, so this may be the solution.
Specialist lenders often charge a premium to consider business that other lenders are unwilling to take.
To find out whether you would need a specialist lender based on your situation, or whether a high street lender may be willing to give you the mortgage that you need, speak with a qualified mortgage adviser.
Are mortgage rates higher for discharged bankrupts?
If you need to use a specialist lender due to your bankruptcy, it is likely that you will be paying a premium for doing so.
Lenders that offer mortgages to people with adverse credit, often charge more on the interest rate or the product fee.
This is because not all lenders are willing to take on these applicants, and the ones that do, feel they’re taking more of a risk due to previous financial struggles.
Your mortgage adviser will be able to give you full details of the interest rate and the associated costs of any suitable deals.
Can ex bankrupts get a Help To Buy mortgage?
There is no reason why ex bankrupt could not get a help-to-buy mortgage if they are meeting the lender’s criteria.
If enough time has passed for the mortgage to fit the lender’s policy, and they meet the remaining Help To Buy criteria, they should be able to offer you a Help To Buy product, assuming that they have them within the lender’s range.
There are also adverse credit lenders that can consider applicants that have been made bankrupt in the past.
To find out which products you may qualify for, speak with a mortgage broker with experience in adverse credit.
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Should a discharged bankrupt person use a mortgage broker?
When you are taking a mortgage, using an independent mortgage adviser is recommended, as they can access a large range of lenders, rather than just one.
If you have been made bankrupt in the past, you would likely not meet the criteria of every lender.
As a result, it should save you time if you consult an experienced mortgage broker, as they will know which lenders to speak to, based on your situation.
Adverse credit is a complicated subject, and there are many different forms.
For instance, bankruptcies, individual voluntary arrangements, county court judgements, arrears, defaults, debt management plans and more are considered bad credit.
Lenders have their own individual criteria around what they accept, and under what circumstances.
This makes the adverse credit mortgage market, a minefield. In this situation, having an expert mortgage broker in your corner should increase your chances of mortgage success.
Conclusion
It is certainly possible for an ex bankrupt person to get a mortgage.
There are however, other factors to consider, for instance, when the bankruptcy took place, and when it was discharged, is one.
How your credit has been contracted going forward, is another factor for a lender to take into account.
Lenders will also need to know full details about your current income, equity within the property, liabilities, debt to income ratio and more.
With a lot to take into account, it is recommended that you find an experienced mortgage adviser that can understand your situation, and look for a lender accordingly.
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The information on this page is not tailored to any individual readers and should not be considered financial advice under any circumstances.
If you are seeking advice about a mortgage, you should consult a qualified professional.
