Right to Buy Mortgage Bad Credit

Using your Right to Buy is an excellent way to get on the property ladder. Rather than passing your rent to the local authority each month, you can buy your own home and invest in your future. We are often asked whether Right to Buy is a realistic option for people with bad credit.

How does a Right to Buy mortgage work?

If you’ve been a council tenant for three years or more, you have the right to apply to buy your home with a discount. The discount increases the longer you have been a tenant.

The maximum discount is £84,600 across England, and in London boroughs it is £112,800. Discounts increase each April in line with the consumer price index (CPI).

After applying to the council and being approved, you will confirm the discount on offer and get all the details to help you decide whether to use your Right to Buy. If you choose to go ahead, you then need a mortgage in order to buy the property from the council.

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

There are many lenders offering mortgages for people to make use of the Right to Buy scheme. These include both high street lenders and more specialist companies. 

As with any mortgage, lenders will look at your credit file as part of assessing your application. If you’re worried about your credit report, it’s important to find out the details before applying. Having a mortgage application rejected is disheartening and can delay your property purchase.

How do I know if I have Bad Credit? 

You should always take a look at your credit file before applying for finance like loans or mortgages. This is a fairly simple online process with a provider such as Check My File. If you have made all your payments on time and stayed within overdraft or credit card limits, you should have a fairly good credit score. 

If you have had any credit problems within the last six years, these will show on your record and could affect your chances of getting a mortgage.

Will credit problems mean I can’t use Right to Buy?

A mortgage lender sees a customer with bad credit as a higher risk . While some lenders might reject a mortgage application due to bad credit, it’s still possible to get a mortgage for a Right to Buy property depending on the situation. Some types of credit issues are taken less seriously than others.

Specialist lenders are often happy to take on customers with varying levels of credit issues, including:

  • 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.

How do I improve my credit score? 

The fastest way to improve your credit score is to make sure you’re on the electoral roll – this is a basic requirement for credit. You may also be able to improve your record by checking for mistakes and asking for them to be corrected.

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

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

One of the advantages of a Right to Buy mortgage is that you don’t always need to have a deposit. Because you are gaining a discount on the purchase price, you are automatically taking out a mortgage for less than the property is worth. Some lenders will therefore offer you a 100% mortgage, with no deposit required. 

But if you have your own deposit to add to the discount, it further reduces the amount you need to borrow. That can often mean you have a wider choice of lenders and more competitive interest rates. In turn, this also reduces the repayments on your mortgage. 

How can a Mortgage Broker help? 

Mortgage Brokers like Ideal Home Loans are experts in the mortgage market and we’re here to help you at every step in securing a mortgage deal. 

We’ll ask you for all the details about your situation and your home ownership plans, check your credit file and make sure you’re clear about how Right to Buy works. Then we’ll look for suitable mortgage deals across the market and support you right through to the day the home becomes officially yours.

We are authorised and regulated by the Financial Conduct Authority to advise on all kinds of mortgages and other financial products. We also arrange Buy to Let mortgages, Equity Release and more.