If you're planning to buy your council home with a Right to Buy mortgage, but you have bad credit, you might be concerned about whether you’ll be approved. Below we take a look at how this could be possible, even with a poor credit history or low credit score.
Can you get a Right to Buy Mortgage with bad credit?
Getting a Right to Buy mortgage with bad credit is absolutely possible in many cases. While it’s definitely easier to secure any type of mortgage with a good credit score, there are specialist lenders who provide mortgages to people in your situation.
However, it’s important to note that while you may still be able to find a willing lender who will approve a bad credit Right to Buy mortgage, there are legal requirements within the terms of the Right to Buy scheme itself that may mean you are not eligible to buy through the scheme. This includes having an active IVA and a pending bankruptcy, so be sure to check the rules of the scheme carefully before applying for a Right to Buy mortgage.
What types of bad credit are accepted?
Much like other bad credit mortgages, those lenders offering Right to Buy loans to borrowers with poor credit each have their own criteria to meet in terms of which type of bad credit they will accept, the minimum length of time that has passed since it occurred, and in some cases, the value of the debt.
The following types of credit issue should be less problematic when trying to get a subprime Right to Buy mortgage:
Credit issues that happened more than six months ago:
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Missed or late payments
Credit issues that happened more than 12 months ago:
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Getting a Right to Buy mortgage with a DMP may be possible
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IVA - although keep in mind that this would need to have been discharged for you to qualify for the Right to Buy scheme
Credit issues that occurred between 3 and 6 years ago:
*Both of these issues are likely to invalidate your eligibility to the Right to Buy scheme
While some high street lenders may be willing to look at less severe credit issues, specialist bad credit mortgage lenders are likely to be more helpful when you are using the mortgage for a specific scheme such as Right to Buy, and have adverse credit.
Available lenders
There are plenty of lenders who offer Right to Buy mortgages, and plenty of lenders willing to look at bad credit applications. The important thing is to find those who are happy to accommodate both sets of circumstances. This is not always easy, but a broker with knowledge in this area, such as ourselves, can help you.
The following lenders accept Right to Buy applications and certain bad credit issues, so will potentially consider both together:
This is not an exhaustive list, a mortgage broker will be able to search the entire market for you.
Begin your mortgage journey
How to get a Right to Buy mortgage with bad credit
If you’re looking to get a Right to Buy mortgage with bad credit then there are some positive steps you can take towards improving your chances of approval. Most of these will need to be done ahead of your mortgage application, so it’s a good idea to do these in the early stages of applying to your relevant council to buy through the scheme:
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Check your credit report: You’ll be best placed to remedy situations if you know where you’ve gone wrong. For example, do you need to register on the electoral roll? Are there any late or missed payments you could rectify, or incorrectly recorded issues? Knowing your credit history will also help brokers to point you to the right type of lender for your circumstances
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Reduce your debt ration: Reducing the balances on any credit cards or loans to 30% or less (for example no more than £300 if your limit is £1000) can help improve your credit score and give you access to more mortgage providers. Remember, not all lenders support the Right to Buy scheme, so it’s important to maximise your pool of potential lenders
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Buy jointly: Keep in mind that you can purchase your home through Right to Buy with someone who shares the tenancy or up to three family members who have lived with you for at least a year. This could improve your affordability, meaning your bad credit is less of an issue for lenders. However, keep in mind that anyone buying the Right to Buy property with you would need to be detailed on the mortgage deed and undergo a full credit check
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Offer a larger deposit: While you won’t often need a deposit for a Right to Buy mortgage as many lenders allow you to use your scheme discount, when you have poor credit, there is more likely to be a deposit requirement. Even where there is no explicit requirement, offering a cash deposit on top of your discount may be enough to sway cautious lenders
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Speak to a specialist broker: Once you’re ready to apply for a mortgage, it’s highly recommended that you speak to a broker with experience of arranging Right to Buy mortgages for bad credit applicants. They will be able to match your credit history to those lenders most able to help you, and have access to specialist lenders that won’t always be available to the public
If you're struggling to get a mortgage with bad credit, don't worry - Money Helpdesk is here to help you find the best bad credit mortgage deal for your needs, so please get in touch today.
FAQs
For housing association tenants, there is a similar scheme called the Right to Acquire. The Right to Acquire allows eligible housing association tenants to purchase the home they are living in at a discount.
As the scheme works similarly to Right to Buy, it is possible to get a mortgage through it if you have bad credit, but your options will depend on the age and severity of the bad credit, and the overall strength of your application.