Help To Buy Mortgages With Bad Credit
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Can I get Help to Buy Mortgage with Bad Credit?
When the Government first launched the Help to Buy scheme, various criteria were in place that closed it off to applicants with certain bad credit issues, effectively denying a helping hand to people who might need it most in the quest to owning their own home. However, changes to Help to Buy in recent years have made it more accessible to people who have suffered adverse credit events in the past.
As only people whose access to credit has been restricted will be denied an application, it’s now possible for people to obtain a Help to Buy loan if they are in any of the following situations:Read More
- Discharged from bankruptcy for a year
When a bankruptcy is discharged, you have no further obligations to your previous creditors and are free to source new forms of credit and borrowing. Stipulating a year from that point gives you the time to build up a new record of healthy financial activity.
- In a current IVA
As an Individual Voluntary Arrangement is not enforced by legal ruling, but entered into with the debtor’s own acceptance and consent, your capacity for borrowing is not restricted. The only issue will be saving for a deposit and showing that you can still afford mortgage payments on top of the debt repayments made through the IVA.
- 12 months without mortgage arrears
As with the period following a discharge from bankruptcy, a year is seen as an appropriate amount of time for you to build up a new credit profile showing a responsible approach to your cash flow and money management, revealing how your previous troubles are now a thing of the past.
As with all kinds of adverse credit, the length of time that has passed since any of the above events has occurred will be a factor in a lender’s approach to your application. It’s not unusual for someone with one of the more severe instances of adverse credit in the more recent past to be asked to put down a deposit of 10% rather than the customary (at time of writing) 5% deposit. To find out your options in your current circumstances, talk your situation over with one of your expert advisers today.
Help To Buy Mortgages With Bad Credit Information
How do I Obtain a Help to Buy Mortgage with Poor Credit?
You may have seen government guidance stating that the Help to Buy: Equity Loan is not available to borrowers whose ability to access credit has been restricted, or who are ‘credit impaired’. The good news is this means most people who have suffered from bad credit in the past (or indeed still have some current issues) are not exempt, as their capacity to borrow is not limited by official rulings.
This is also the case if any previous sanctions over adverse credit have been lifted. If you are no longer in a debt management plan or registered as bankrupt, or subject to any other scheme where your access to credit is restricted, you are no longer ‘credit impaired’ and so are free to apply.
Of course, while you are completely able to apply for a government Help to Buy loan, you will still be subject to the usual assessments and credit checks, just as with a mortgage. The lender will look into your current income, expenses and financial commitments outside of a mortgage to ensure you will be able to afford the repayments over the lifetime of the loan. If your application presents your present finances in a good and healthy light, and you can show a clean credit profile for the past year, you should be successful.
Fortunately, the Help To Buy loan is interest-free for the first five years. After five years, an interest rate of 1.175% will be charged on the amount you still owe, rising by 1% of that amount plus the inflation rate each year. You will have up to 25 years to pay back the loan, or must repay it earlier if you sell the property. As it is an equity loan (similar to having a ‘stake’ in your house), if you sell your home you will have to also pay a proportional share of the increase in value of the property to the government. For example, if the Help to Buy loan accounted for 20% of your mortgage value, you will need to pay 20% of the increased property value.
I have Discharged Bankrupt - Can I get a Help to Buy Mortgage?
There is good news if you are a discharged bankrupt and seeking to apply for a government Help to Buy: Equity Loan. The criteria has become more flexible in recent years and you are now able to apply for the supplementary finance if it has been twelve months or more since your bankruptcy was discharged.
However, even with the Help to Buy loan bringing down the loan-to-value ratio of your mortgage, you are likely to face some challenges when it comes to applying to lenders for a home loan. With a bankruptcy on your credit files, you’ll find that the criteria imposed by the vast majority of mainstream lenders will preclude them from lending to you, and your applications to high street providers will be a dead end.
Fortunately, there are a number of specialist mortgage lenders in the UK market who cater to people who have experienced serious financial problems in the past, and who could be able to supply you with a mortgage, even if your records feature a discharged bankruptcy. They will typically take a broader view of your circumstances than the high street lenders and will place more weight on your current situation and what you have done to keep your finances on track than simply historical instances of adverse credit.
We know of a handful of lenders who will be willing to offer a mortgage the first day after discharge, although you will need to prove your income and ability to pay is watertight, and you’ll likely need to supply a larger deposit and will be charged a higher rate of interest. More lenders will be happy to lend to you after 12 months, giving you time to re-establish your finances on an even keel, but more still will consider your application after three years have passed, especially if you have kept a clean credit profile since the discharge.
The only way to access these lenders is through an experienced mortgage broker with connections across the whole spectrum of the industry. Talk to a member of our team to find out more.
Can you get a Help to Buy Mortgage with Defaults?
If you have been in the unfortunate position of a string of missed payments – possibly on a credit account, but perhaps also with your mortgage – leading to a default notice, then it’s likely that you will have encountered some problems when applying for further credit or a mortgage via a mainstream lender. Most high street lenders will steer clear of applicants with anything but the cleanest of records, and default notices on your credit file will be a red flag to their computerised assessment systems.
However, as you probably know, there are a number of specialist lenders operating in the niche-market end of the industry who will be happy to consider applicants with defaults on their files, and it’s likely that you will find alternative avenues for a mortgage among them. The biggest influence on your options will be the nature of the defaults themselves. If they were against a non-priority debt, such as a mobile phone bill, then lenders will take a less severe view and may also consider other extenuating circumstances as well as your payment conduct since. If you ran up defaults on your mortgage leading to a notice being served, then this will obviously be viewed far more seriously, and they may want to take a closer look at your other finances.
Time will also have a big part to play, as will the amount of money involved. If the defaults were relatively significant, such as mortgage payments, and occurred within the last 12 months, then they will cause far more of an issue than a string of smaller sums that were unpaid a few years ago. In general, you may be asked to provide a larger deposit or accept a higher interest rate, but if the defaults are more than three years old, and you’ve kept a clean sheet since, you should still be able to access reasonably competitive deals.
As your access to credit is not impaired, this will not affect your chances with a Help to Buy: equity Loan. This may in turn help your case with lenders, as you will be able to reduce the LTV ratio on the mortgage and therefore pose less of an overall risk.
The only way to truly assess how much of an impact the defaults on your record will have on your application for a mortgage using the Government’s Help to Buy scheme is to talk over your situation with an experienced mortgage broker who has dealt with these kinds of situations many times before. Get in touch today to arrange a free, no-obligation initial consultation.
I have a CCJ - Can I get a Help to Buy Mortgage?
Trying to get a Help to Buy mortgage with one or more County Court Judgments (CCJs on your records can be more challenging than many adverse credit events. Being one of the more severe instances, entered in the statutory Register of Judgments, Orders & Fines, while you will not find your access to new borrowing impaired legally, you will still find it more difficult to take out a credit card, obtain a personal loan, open a bank account or apply for a mortgage.
This will not have too much of an impact on your ability to get a Help to Buy: Equity Loan, if you satisfy all the other criteria. But it will narrow your choices when it comes to where you can source a mortgage, which will already have been reduced due to the need to deal only with lenders who are willing to offer a mortgage in conjunction with the Government’s Help to Buy scheme.
The process is likely to be more rigorous than it would have been for a more minor bad credit item, and lenders will want to look into a few influencing factors around the CCJ to satisfy their assessment of your level of risk. The key points they will need to know will include:
- How many CCJs are registered against your name
- How long ago they were registered
- The amount of money that was owed
- Whether the debt has been satisfied or is still outstanding
- The length of time the CCJ(s) was in effect
Lenders will also be keen to know other relevant details around the application, such as any amount of equity already invested in your current home (if this is the case), and the loan-to-value (LTV) ratio of the mortgage you need for your new-build property once the Help to Buy loan is taken into account.
To make sure your application for a mortgage with the Help to Buy scheme runs as smoothly as possible, we recommend settling any outstanding CCJs as quickly as you can, if you are in a financial position to do so. The more historic the CCJ, the better, as you will have had more time in the interim to maintain a healthy credit profile and rebuild your credit score, but if the CCJ was relatively recent, you should take as many measures as you can to create a respectable credit record.
Help to Buy Mortgage rates with Adverse Credit
When looking to obtain a mortgage aided by the Government’s Help to Buy scheme with a history of adverse credit, one of the most frequent concerns is interest rate that will be applied to the loan. In general, there are three things that will most greatly influence the rate you will get offered:
- The nature of the issue(s) – whether your credit history contains more severe events such as a bankruptcy or CCJs, or just one or two instances of late or missed payments, as well as the amount of money involved and whether or not debts are still outstanding.
- The amount of time that has passed – if fairly recent then this could indicate you still have financial difficulties, but if the issues occurred a few years ago you will have had time to get your finances back on track and establish new, healthy patterns of borrowing and repayments.
- The amount of deposit you can provide – the larger the deposit, the less money you’ll need to borrow for the mortgage and the more security the lender will feel in the loan. The only problem you might have, if you had been working through financial issues recently, is putting money aside for a deposit on top of your other commitments.
Someone applying for a mortgage with bad credit on their records, especially using the Help to Buy scheme, will find the most competitive rates are only available through specialist lenders, who are geared to accommodating people who have suffered previous issues with money. Mainstream providers are likely to decline such an application, or in some rare cases might be prepared to loan but only at a very high interest rate to reflect the perceived extra risk.
Because of the dynamic nature of the mortgage market, with products and deals being introduced, changed or withdrawn every day, it’s not possible to provide a list here of the ‘best’ rates or the most likely range you’ll be looking at. We simply can’t predict the market at the time you’ll be reading this, and the deal you get offered will be largely dependent on your individual circumstances.
The best way to discover the most favourable rates you can expect for a Help to Buy mortgage with adverse credit that will meet your needs and most closely match your circumstances is to go over your situation and your aims with an experienced specialist mortgage broker. We are often able to source exclusive deals. If you call our team today, we’ll set up a free, no-obligation initial consultation.
Help to Buy Mortgage Lenders with Bad Credit
Adverse credit, or a poor credit rating, can unfortunately have a significant impact on your options when it comes to finding a lender willing to grant you a mortgage. The majority of mainstream or high street lenders will be likely to turn down your application if a credit check reveals anything more than one or two instances of the mildest forms of bad credit, and even then none within the last three years. Many of them simply base their decision on a numerical score generated by their own assessment or derived from the three main credit reference agencies, or simply on the presence of any adverse credit on your records at all.
So, you’ll need to look beyond the high street for a mortgage with adverse credit. The good news is that plenty of alternatives exist within the specialist lending sector, where companies have been set up to specifically help those who have experienced financial difficulties in the past.
In the aftermath of the credit crunch in 2008, banks adopted far tighter lending regulations and became a lot more risk-averse, effectively shutting a great many would-be homeowners with varying degrees of adverse credit out of the property market. To plug this gap and provide much-needed assistance to this significant minority, a growing number of specialist lenders entered the market to meet borrowers’ needs, using different criteria to assess applicants and adopting a more open approach.
Specialist lenders will take a broad view of your finances and, instead of simply judging by past events or a low credit score, will examine the circumstances of your adverse credit to understand why it happened, when it happened, and what has changed with you in the time since then.
The only downside is that specialist lenders do not accept applications directly from members of the public. To access their products and deals, you’ll need to work through an established unlimited mortgage broker, who’ll be able to tell you exactly which lender will be the best fit for your case, and may even be able to negotiate a more favourable deal on a personal basis. This is a win-win situation for both parties, as the lender will know you have already been assessed by the broker and will be a suitable candidate.
Help to Buy Mortgage Broker
Whether or not adverse credit features on your financial records, it’ll pay to have a specialist broker on your side when you need to find the right mortgage to suit your individual circumstances – especially when using the Government’s Help to Buy scheme to purchase a new-build home. You’ll probably need to connect with one of the many specialist lenders currently in the market who cater to the needs of people requiring a slightly different approach to borrowing, but who don’t advertise publicly. They only take applications made via a trusted intermediary, such as an expert specialist mortgage broker.
Specialist mortgage brokers will have a great deal of experience in finding the most favourable deals for people looking for a Help to Buy mortgage in a variety of situations. If you have a history of bad credit, they will take the time to go over your circumstances, establish why the events occurred, and will run assessment tests that mirror those used by the lenders themselves to ensure that you will meet their criteria. They will also offer tips on how you can improve your credit profile in preparation for making an application.
It’s important to not hold back any relevant information from your broker, as this could seriously affect the advice they are able to give, and, aside from damaging the relationship, may even result in you being offered an unsuitable mortgage product. When it comes to the application, they can advise on how to frame your finances so they appear in the most positive light, and will stay with you every step of the way to ensure the process runs smoothly.
As unlimited mortgage brokers, our advisers at The Mortgage Centres have access to approximately 12,000 mortgage products available through over 90 providers, which includes a large number of offers you won’t find on the high street. We’re often able to source deals on an exclusive basis, and can often negotiate a slightly better rate on the most suitable product, if circumstances allow, to get you a more favourable deal in the long run.
Trying to navigate the mortgage market on your own, or using a broker who is tied to a certain group or portfolio of products, will restrict your options and may mean you never get to hear about the mortgage that would have been a perfect fit for your circumstances. Getting a Help to Buy mortgage doesn’t have to be stressful – get in touch with our team today to arrange a no-cost, no-obligation initial discussion to find out all your options.