Bad Credit Right to Buy Mortgages

The Right to Buy scheme has opened up the dream of homeownership to thousands of public sector renters who otherwise might never have been able to afford to get on the property ladder, and just because you have bad credit doesn’t mean you can’t be one of them.

We’ve put together this comprehensive guide to help you understand your options and give you the best possible chance of securing a Right to Buy mortgage with bad credit.

Can you get a Right to Buy mortgage with bad credit?

Yes, it’s possible, although it may involve a specialist lender. The mortgage application process is essentially the same for a Right to Buy mortgage as a standard mortgage, and so your credit history is one of the factors that lenders will look at when considering risk. Bad credit can come in many different forms, and whether or not you can get a mortgage will very much depend on your individual circumstances.

In May 2015 the Right to Buy scheme was extended so that you only needed three years as a public sector tenant rather than five to qualify. This opened up the opportunity to more people and as a result more lenders have become interested in the market. There very likely will be a Right to Buy mortgage out there for you, even if you have a poor credit history, it’s just a case of finding the right one.

Types of credit issues Right to Buy lenders will accept

There are some bad credit issues that will make getting a Right to Buy mortgage very difficult – an undischarged bankruptcy for example could make you ineligible for the scheme at all – and recent repossessions or CCJs are likely to be large red flags for lenders. At the other end of the scale, a few late payments may not carry much significance.

As well as the type of credit issue, Right to Buy lenders who offer bad credit mortgages will look at how long ago it occurred and the amount of money. The longer ago the problem and the smaller the amounts involved, the less impact it’s likely to have on your mortgage application.

The main thing with bad credit is to be honest, prepared and informed. Before you start your application, get copies of your credit files and find out exactly where you stand. Check for any inaccuracies that you can correct before you start the process and gather any documentation that can help to show that any problems have been addressed properly.

How a broker can help

If you’re worried about the impact of bad credit on your Right to Buy mortgage application then getting the help of an expert broker is key. Don’t be tempted to take the chance and rush into an application alone – if you approach the wrong lender and get declined this will further impact your credit score and make it even harder to secure a loan.

Not all brokers have experience in bad credit mortgages or the Right to Buy scheme, but the right one for you  will be able to identify the specialist lenders who will be most sympathetic to your circumstances. They can also help you prepare a comprehensive application, giving you the best chance of success, even with poor credit.

Right to Buy mortgage eligibility

Before you think about a mortgage, you’ll need to check that you are able to actually buy your property. To be eligible for the Right to Buy scheme, you must meet a set of minimum requirements, set by the government:

• The home must be your only property or main residence
• It must be self-contained with no share facilities like bathrooms or kitchens
• You must have a legal contract with the landlord
• You must have been a public sector tenant for at least three years. This includes a local council, NHS trust or housing association and it doesn’t need to be consecutive years.

The discount you’re entitled to will then depend on the property type, location, value, how long you’ve lived there and whether you’ve used the Right to Buy scheme in the past, as well as whether or not the landlord has spent any money on it recently.

Depending on the type of adverse credit you have, you might need to find a bad credit lender to get approved for a Right to Buy mortgage. They have the flexibility to assess your application based on the age, severity and type of adverse you have, but you might struggle to find one without the help of a specialist broker.

Other factors impacting eligibility

Once you know you’re eligible for the Right to Buy scheme, you’ll need to secure the mortgage. As we’ve discussed, bad credit is one of the things lenders will look at when assessing your application, but other factors will come into play too:

• Discount – Lenders will look at the discount being offered as a proportion of the market value of the property and take this into consideration when looking at deposit requirements and affordability. You can work out how much discount you’re entitled to using our calculator below.

• Income – It’s essential for lenders to be able to see that you can afford your mortgage repayments, especially if you have a bad credit history, so you’ll need to provide information on all your sources of income as well as any existing debt commitments. Some benefits count towards income so check with your broker what you can include.
• Deposit – Although the discount offered through the Right to Buy scheme often means a deposit isn’t required, if you have bad credit a lender may ask for a small deposit contribution from you, regardless of the discount. This would normally be around 5-10%, although if you are able to put down more this can help your application be looked at more positively.

Things to consider

There are a few extra things to bear in mind if you’re applying for a Right to Buy mortgage with bad credit, all of which a specialist broker will be able to help you with.

Getting a Right to Buy mortgage if you’re self-employed

Your employment status shouldn’t preclude you from getting this type of mortgage, but it can make it more difficult to find the right lender, especially if you already have a bad credit history counting against you. If you’re self-employed, then the more financial history you can show the better.

Adding other names to the mortgage

Just as with a standard mortgage, it’s possible to take out a joint Right to Buy mortgage and if you have bad credit then adding a second person with a better financial record or higher income could potentially  boost your application. A joint applicant needs to have been living with you for at least a year but doesn’t need to be on your tenancy.

Reselling your home

While the discounts available on Right to Buy properties can make them a great investment, remember that it’s not designed to be a quick way to make money and you can’t immediately resell and pocket the cash to deal with any existing credit problems. If you resell your home within five years you will be eligible to repay part of the discount – 100% of it if it’s within the first year, then a sliding scale down to 20% in year five.

Get matched with a broker specialising in bad credit Right to Buy mortgages

Securing a Right to Buy mortgage with bad credit can be difficult but the good news is that you don’t need to go it alone. No one expects you to navigate the vast array of specialist lenders and deals yourself – that’s what mortgage brokers are for.

We work with a large number of advisors who have particular expertise in securing these types of mortgages, meaning you don’t have to worry about how to choose the right lender and can rest assured that you’ll be getting the very best deal. Call 0808 189 0463 or make an enquiry and we can match you, free of charge, with a specialist bad credit Right to Buy mortgage broker today.