Can you get a second mortgage after bankruptcy? 

This question is frequently asked on the internet by UK residents. Some people ask it from the perspective of getting a second first charge mortgage – i.e. a second mortgage to buy another property – whereas others ask if referring to a second charge mortgage to borrow more against their current property. 

Get answers to either scenario in our second mortgage and bankruptcy guide, right here! 

Second mortgages vs second charge mortgages

Second mortgages and second charge mortgages can cause confusion. Here’s why…

A mortgage is generally known as a loan to buy a property. We ask the bank to borrow money through a mortgage to help fund a property purchase, either to live in it ourselves or as a rental investment. The proper name of these mortgages is a first charge mortgage. As a mortgage is secured against the property we buy, the home may be repossessed if we do not keep up mortgage repayments. 

A second charge mortgage is also a loan secured against a property. But it is not used to buy a property. Instead, it is secured against the amount of equity you have in the property, which also contributes to how much you can borrow. Home equity is the amount of the home you own without debt attached, calculated by subtracting your existing first charge mortgage away from the property value. The money can then be used for a number of purposes but is often used to fund home improvements. 

In summary, a second mortgage is used to buy another property and a second charge mortgage is a loan used for any purpose. They are both debts secured against a property. The confusion arises because some people shortened second charge mortgages to “second mortgages”. 

And that’s why anyone asking if they can get a second mortgage after bankruptcy could be referring to either “type” of second mortgage. 

Can I get a mortgage after bankruptcy?

It is possible to get a mortgage after you have been declared bankrupt but you will need to wait until you have been discharged from your bankruptcy first. The longer time passes after being discharged the greater chance you have of being approved for a mortgage. If you apply straight after being discharged, it’s near impossible but not impossible to get approval.

This applies to all types of mortgages, including residential mortgages and buy-to-let mortgages used for rental investments. 

How much deposit will I need for a mortgage after bankruptcy?

As the chances of being approved increases as time passes from the date you were discharged from your bankruptcy, the amount of deposit required to get approved also decreases. For example, if you want to get a mortgage after bankruptcy within a year of your discharge date, you’ll probably need around 40% of the property price as a deposit. Waiting two years after your bankruptcy discharge date can half the amount of deposit required on a property to 20%. 

These figures are estimates only based on market research from professional mortgage advisors in the UK. 

Can you get another mortgage after bankruptcy?

It’s also possible to get a second mortgage after bankruptcy. You might have lost your previous home as part of the bankruptcy process and therefore the same guidelines and information apply, as discussed above. 

If you decide to apply for a second mortgage after bankruptcy, it is highly recommended that you engage with a mortgage advisor that is a specialist at securing mortgages for people with adverse credit. These professionals will know which lenders are more likely to accept people who have been made bankrupt in the past.

What interest rate will I be offered?

Lenders offer interest rates on their mortgage products based on personal finances and their credit history. With a bankruptcy on your file, you will be deemed a lending risk and are highly likely to be offered a much higher interest rate in comparison to those with good credit. More often than not, you’ll be offered the maximum interest rate the lender can offer. 

This can make getting a second mortgage after bankruptcy unaffordable and you may want to save more for a greater deposit so you need to borrow less. 

Can you get a second charge mortgage after bankruptcy?

It’s possible to get a second mortgage after bankruptcy and it’s also possible to get a second charge mortgage after bankruptcy. To get a second charge mortgage you’ll need a new home with a new mortgage and adequate equity in your home to secure the second charge. 

To have these things already, you’ll need to have been discharged from your bankruptcy a while ago and be on track with your new mortgage repayments. Thus, it is possible to get a second charge mortgage after bankruptcy, but it will only become an option after many years of handling your new mortgage payments effectively. 

How many years after bankruptcy can you get a mortgage?

Getting discharged from bankruptcy usually takes 12 months, but there are some instances when it can be quicker. Only after you are discharged can you apply for a mortgage, which usually means waiting 12 months minimum. However, your chances of getting approved during this time are much lower and it is advised to wait at least three years before applying. 

Can we get a joint mortgage if my partner’s filed for bankruptcy?

You can still apply for a mortgage with someone who has been made bankrupt in the past, as long as they have been discharged at the point of application. It will be harder to get approved without using specialist lenders and you’re likely to pay higher interest. 

Don’t try to hide a bankruptcy on any application because it will appear on your credit file, which will always be checked. 

Learn more about bankruptcy here!

Bankruptcy can be a confusing topic, which is why MoneyNerd has created a full guide explaining what it is and the implications. Check it out now!  

We also have much more on second charge mortgages! 

About the author

Scott Nelson

Scott Nelson is a financial services expert, with over 10 years’ experience in the industry, including 6 years in FCA regulated companies. Read more
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