Right to Buy Mortgage with Bad Credit

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Right to Buy Mortgage with Bad Credit

Right to Buy is a great scheme that helps council tenants get on the property ladder. Rather than pay rent each month, your money could go towards a mortgage and investing in your own home. But is Right to Buy a realistic option for individuals with bad credit?

How does a Right to Buy mortgage work?

Anyone that has rented a property from their local authority for three years or more has the right to apply to buy their home. The big advantage of this approach is that you are entitled to a good discount on the property value – and the size of the discount increases the longer you have been a tenant.

The maximum Right to Buy discount in 2024 is £102,400 across England, but in London boroughs it is £136,400. The discount increases each April in line with the consumer price index (CPI).

To use your Right to Buy, you apply to the council housing department for the details. If you choose to go ahead, you need to organise a mortgage to buy the property from the local authority.

Can I get a Right to Buy mortgage with Adverse Credit?

Various lenders offer mortgages for using the Right to Buy scheme, including some high street lenders. As with any mortgage, your chosen provider will look at your credit record as part of the application process.

If you’re not sure what your credit report will say, get the details before you pursue Right to Buy or a mortgage. Bad credit will not necessarily stop you getting a mortgage, but it might narrow down your choice of lender.

How do I know if I have Bad Credit?

If you stay in credit in your bank account, don’t go over your credit card limit and make all your payments, your credit score should be fairly good.

Missing payments, defaulting on finance or a loan and more serious debt problems will show on your record for six years and could affect your chances of getting a mortgage.

It’s not difficult to look at your credit record – you can use a provider like Check My File which will help you understand what finance providers will see when they research you.

There are many types of credit issues and they vary in severity. These might include:

  • Low credit score
  • Late payments
  • Mortgage arrears
  • Defaults
  • County Court Judgments (CCJs)
  • Debt management plans
  • IVA
  • Bankruptcy
  • Repossession

Bankruptcy is potentially the most serious issue, but there may still be ways to find you a mortgage even if you have previously been declared bankrupt.

Speak To An Expert

We’ll take care of all the heavy work. From finding the right mortgage product and providing you with a detailed quote, to submitting the mortgage application on your behalf and guiding you right through to the completion of your mortgage.

How does bad credit affect eligibility for a Right to Buy mortgage?

Mortgage lenders tend to see customers with bad credit as a higher risk – you’re perhaps more likely to miss mortgage payments and fall behind. Some lenders will reject customers with bad credit, but every mortgage company is different.

If you have severe credit issues, you may find that you are restricted to more specialist lenders, who may offer higher mortgage rates.

How do I improve my credit score?

Make sure you’re on the electoral roll – this is a basic requirement for credit. Another quick fix for your credit rating is correcting any errors that are listed.

Otherwise, it’s a question of staying within your credit limits and paying all your bills and standing orders on time.

How much can I borrow on a Right to Buy mortgage?

The amount you can borrow is based on your income and outgoings. Lenders will look at your salary and calculate a sum that will be affordable to you. The total may vary from lender to lender, but it is often around four to five times your annual income.

Do I need a deposit for a Right to Buy mortgage?

A great advantage of a Right to Buy mortgage is that you don’t always need to have a deposit. Because of the discount on the purchase price, your mortgage is for less than the property is worth. This means that some lenders will offer you a mortgage for the whole discounted property cost, with no deposit needed.

If you do have a deposit to add to the discount, it will reduce your monthly repayments and make the mortgage cheaper. It could also mean you have a wider choice of lenders and more competitive interest rates.

How can Mortgage Broker Services help me?

As experts in the mortgage market, we’re here to help you at every step in getting a mortgage deal.

We’ve supported many mortgage applicants with a Right to Buy purchase including those that have needed bad credit mortgages. We talk through all the details about you and the property you want to buy, then we’ll check your credit file and look for suitable mortgage deals. We’ll also explore whether it makes sense to buy now or wait until you have improved your credit score.

To find out more about how we can help you, contact us today.


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