Right To Buy Mortgage with Bad Credit 

What is an Adverse Credit Mortgage? 

There is no particular mortgage product intended for those who have bad credit. There are, however, some lenders who offer mortgages to those with an adverse credit history. 

It’s important to know that not all lenders will accept applicants with poor credit. As well as fewer choices of mortgage product, you are also likely to pay higher mortgage rates, a larger deposit and will more than likely be offered a lower loan amount.

Whilst each lender will have their own specific guidelines, most will take into consideration the reason you have poor credit. Life events such as redundancy and illness will be given more leniency than frivolous spending, by most lenders.

Late and Missed payment

A one-off late or missed payment will sometimes be overlooked. It’s important to note that this depends on where your missed payments lie. For example, missing a mortgage payment will be seen as far more of a red flag than paying your mobile phone bill a few days late. 

A number of missed payments in a row or a default will be seen as more of a concern, and the amount owed will also be taken into consideration.

IVA’s and Debt Management Schemes

If you have an IVA or debt management plan, securing a mortgage whilst they are still active is very unlikely. Most lenders require that you’re at least a year clear of your debt management plan and three to four years clear of your IVA, before you are considered for a mortgage.

CCJs

If you have any CCJs recorded against you, it’s important to ensure you clear them before making a mortgage application. CCJs that are fully satisfied will be considered by most lenders, as long as they are not abundant, so it’s a good idea to check your credit file in advance.

Bankruptcy

If you have had a bankruptcy, unfortunately it’s highly unlikely that you will be accepted for a mortgage by most high street lenders. There are specialist lenders who will consider bankruptcies that have been discharged six or more years ago.

What is a Right to Buy Mortgage? 

If you’re a tenant in a housing association or local authority property you may be able to purchase your home at a significant discount through the Right to Buy scheme. There are usually a number of criteria to satisfy:

• You live in England, the scheme doesn’t exist in the rest of the UK
• The property is your only home
• There are no shared aspects to the property, such as kitchen or bathroom
• There is a rental contract in place
• You have had a public sector landlord for at least three years (not necessarily in a row)

You will not usually need a deposit for this type of mortgage, but you’ll have to prove that you can afford the repayments on your mortgage and undergo credit checks.

Can you apply for Right to Buy Mortgages if you have Adverse Credit? 

There are specialist lenders who will consider those with poor credit. Again, the severity of your credit issues and how long ago they occurred will be the deciding factor.  

If you can show mortgage lenders that you’ve made an effort to improve your credit score since your issues, this will help to convince them that you can be a responsible lender.  

How do I Improve my Credit Score? 

It’s easy to obtain a copy of your credit report online and there are a number of ways to improve your score:

• Make sure all information held on your file is accurate (addresses, dates, defaults)
• Pay off any CCJs and defaults first to clear them and work on finalising any payment plans you have in place
• Don’t take out any further credit
• Only use a small percentage of the credit already available to you
• Make prompt monthly payments on all accounts, clearing the balance in full where possible
• Ensure you name is registered on the electoral register at your current address
• If you’ve had no credit in the past, specialist credit building credit cards can help you improve your score
• If there are valid reasons for missed payments, such as illness or redundancy, contact the credit reference agency to ask them to add a note to your file.

How Can A Mortgage Broker Help?

If you have a history of credit problems, rejected mortgage applications will further impact your score. Mortgage brokers know the acceptance criterias for the full range of mortgage lenders available. They can therefore steer you away from those lenders who will reject your application.

A mortgage broker can support you throughout your entire home buying process. They provide unbiased advice, as well as saving you time and money.