How to get a Mortgage after Bankruptcy
Getting a mortgage whilst bankrupt or after bankruptcy can be a tricky process. In most cases, those who have declared bankruptcy will find it very difficult to secure a mortgage. But there are some lenders that may be willing to provide mortgages for people in this situation.
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Factors to consider when applying for a mortgage after bankruptcy
In general, lenders will require applicants to have their bankruptcy discharged for at least three years before they will consider offering them a loan.
If the individual has been discharged for less than three years, then they may still be eligible if they can demonstrate that their financial situation has improved significantly since filing for bankruptcy and that they are able to make regular payments on the loan.
Bigger deposit required
It is also important to note that those who have experienced any kind of significant credit issue, such as a debt management plan, CCJs, having an IVA or being declared bankrupt, may need to put down higher deposits or pay higher interest rates as part of their agreement with the lender.
Strict affordability assessment
In addition, lenders will require potential borrowers to provide details of their current income and outgoings in order to assess their ability to repay the loan. This is because lenders need assurance that the borrower will be able to keep up with any mortgage payments in case of a change in circumstances such as job loss or illness.
Seek specialist advice
When considering whether or not someone who has declared bankruptcy can get a mortgage, it is important to approach experienced financial advisors and specialist bad credit brokers who understand how this type of loan works and what type of options are available. They should also be able to advise on what documents you will need when applying for a mortgage after bankruptcy as well as helping you work out how much money you could borrow and over what period of time.
Set a realistic budget
It is important to create a realistic budget plan which takes into account all current income sources, expenses, as well as any future payments that may need to be made (such as taxes). By doing so you will have greater control over your finances going forward - enabling you both to pay off existing debts faster and better manage future obligations so that you don't end up back in the same situation again.
Plan carefully and be patient
Overall, getting a mortgage whilst bankrupt can be done but it requires careful planning and consideration. It is essential that anyone looking into this type of loan understands exactly what kind of terms they are signing up for, so that they know exactly where they stand should anything unexpected happen or change during the repayment period.
With proper assistance from an experienced financial advisor or broker, getting approved for a mortgage after bankruptcy could prove immensely helpful in breaking free from financial difficulty once and for all.
How long does a bankruptcy stay on credit report?
An individual's bankruptcy will remain on their credit report for six years from the date of filing. Anyone who has declared bankruptcy could have a poor credit score for the entirety of this period, making it difficult for them to access important financial products such as credit cards and mortgages.
Lenders are likely to view these applicants with suspicion as they may consider them to be a greater risk due to their financial history.
Start saving for a deposit
It’s also highly beneficial if individuals can set aside some funds in order to create a cash reserve buffer which can help absorb any unexpected expenses or unforeseen circumstances such as loss of employment or large bills. Having this financial cushion in place should make it much easier for those with past bankruptcies to apply for loans more confidently in the future, and better manage their finances without having to rely on debt-based solutions such as high interest rate payday loans which could do more harm than good in the long run.
Apply for an early discharge
In some cases, applicants may be able to reduce the time taken for a bankruptcy to fall off a credit report. If an applicant successfully completes all the relevant payments or obligations listed within the Bankruptcy Order and has done so within 12 months (or 18 months if they are subject to an Income Payments Agreement), then they can apply for an early discharge which could potentially leave their credit file after just three years.
Build your Credit Score back up
However, even with this option available, it’s still advisable for those who have recently been discharged from a Bankruptcy Order to take steps towards rebuilding their creditworthiness before attempting to secure financing again. One way of doing so could involve opening up a secured loan account such as a secured credit card with limits set at an affordable level and ensuring that regular payments are made on time in order to demonstrate responsible borrowing habits over time.
How much deposit will I need for a bankruptcy mortgage?
When applying for a mortgage after bankruptcy, the amount of deposit required will depend on several factors, including your credit score, the type of loan you are looking for and the individual lending policies of the lender.
40% to 50% deposit may be needed
Generally speaking, individuals may need to provide a larger deposit than usual when applying for a bad credit mortgage due to their past financial history and the risk that entails.
For example, most lenders will require applicants with recent bankruptcies to have a minimum 10% deposit before they can consider an application. This is because bankruptcy is seen as a ‘high risk’ borrowing option by lenders and so they look for individuals who have significant savings in order to reduce this risk.
Additionally, specialist lenders may require applicants with low credit ratings or recent bankruptcies to have even higher deposits of up to 40-50%, depending on their circumstances.
Be prepared to negotiate
Seeking advice from an experienced broker or financial advisor should always form part of any strategy when considering how much deposit one should put forward in order to obtain a mortgage following bankruptcy.
Such professionals can help identify which lenders are likely to accept applications from those with recent bankruptcies and may even be able to negotiate better terms and interest rates than what would otherwise be available due to their expertise.
Furthermore, doing so could provide other benefits such as helping an individual access financing more quickly than usual and potentially securing better deals than what would otherwise have been available due to the experience of such professionals.
Getting a buy-to-let mortgage after bankruptcy
For those who are looking to secure a buy-to-let mortgage after bankruptcy, the process can be more complicated and lenders may view this type of financing as a greater risk.
Handle with care
There is no doubt that getting a mortgage after bankruptcy can be possible if handled with care and responsibility. It may involve higher deposits or interest rates as lenders will view individuals with past bankruptcies as riskier customers but it’s certainly not an impossible task.
With the right guidance and advice from experienced financial advisors or brokers, it is entirely possible for individuals to secure the financing they need without having to sacrifice their long-term financial security in the process.
Get professional advice
It is important to seek out advice from experienced professionals such as advisors or brokers who understand the complexities of obtaining buy-to-let mortgages following bankruptcy. Doing so could help individuals identify which lenders are willing to provide finance for those who have declared bankruptcy and may even offer better interest rates than what would otherwise be available due to their experience in finding the best deals for people with past bankruptcies.
Show you are responsible
The key is to try and demonstrate financial responsibility in other areas such as setting up a budget and creating a cash reserve fund before applying for any new forms of financing.
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