Am I eligible for a Right to Buy mortgage with Bad Credit?
Yes, you are. It is totally possible to get a Right to Buy mortgage with bad credit.
Typically, lenders use their own scoring system to assess whether you pose a high risk of non-payment. They will also look at your credit reports from the three main credit reference agencies. A lender’s scoring system is based on a variety of criteria including:
- the type and severity of any previous adverse credit events,
- how long ago they happened,
- the amount of money involved.
Fortunately, with mainstream banks being more risk-averse, many lenders have filled the gap in the market for servicing applicants with a blemished credit history. These specialist lenders offer Right to Buy mortgage products to suit people with bad credit. However, your ability to secure an affordable rate may be affected by any bad credit issues you’ve had.
At The Mortgage Centres, our brokers are experts in bad credit mortgages. We have access to a network of lenders and exclusive deals you won’t find on the high street. Our experienced advisers can help you find exactly the right mortgage to suit your circumstances.
What should I do if my credit records show Bad Credit?
- The first thing you should do is verify the facts and make sure any adverse entries are correct. Any instances of default, missed payments or other signs of bad credit management should be checked against your own statements. And if you find anything that is not as it should be, you must contact the appropriate company right away to get it amended. Credit companies do make mistakes and will correct inaccurate entries within a few weeks of notification.
- You can also include mitigating factors behind a bad credit event in your report that were beyond your control. For example, if you were a victim of fraud or you lost your income after your employer went bust. Tell the credit agencies about it and they might be prepared to add a note explaining circumstances. This in turn could help to swing a mortgage decision in your favour.
- You can also take several proactive steps to try to repair or rebuild your credit rating. These include making sure you are on the electoral roll, closing unused credit facilities and avoiding any unnecessary credit. For a complete run-down of what you can do, take a look at our tips on how to repair your credit rating.
Right to Buy with Bad Credit FAQs
- Can I use my Right to Buy discount as a deposit?
- My Right to Buy flat is in a high-rise building – can I get a mortgage?
- What is the maximum age lenders will accept on a bad credit Right to Buy mortgage application?
- When I buy my Right to Buy property, can I borrow more for home improvements?
- Can I rent out my Right to Buy property once I have obtained a mortgage?
It is possible to use your Right to Buy bad credit mortgage discount as a deposit but it will depend on the lender. Most will be fine to treat your Right to Buy discount as a deposit, but this is not the same for all lenders. Some are likely to still ask for a cash deposit to secure the property purchase.
The Right to Buy scheme applies to all kinds of properties, both flats and houses of all descriptions. However, much is down to the lender, as they have their own policies for lending against certain properties. It’s best to make sure lenders you speak to are aware of the property type and ask them if they avoid high-rise flats.
There is no age limit on the Right to Buy scheme, but most lenders have an upper limit for who they are willing to lend to. This allows them to ensure that the borrower will be able to pay back the amount owed, especially in retirement.
It might be possible to borrow extra money against the property to carry out home improvements. However, this will depend on the property value, the level of discount and the maximum loan-to-value ratio.
Bear in mind that for leasehold properties, you may need permission from the freeholder before you make any changes.
If you buy your property through Right to Buy, this does not stop you from renting it out afterwards. Although it might affect the type of mortgage and the terms you will be able to get from the lender, as they still have a say. If you fully intend to rent your property after you buy it, then you will need to get a Buy to Let mortgage. But many lenders will not permit these on a Right to Buy purchase.
Like any mortgage product letting consent policies vary considerably from lender to lender. Some can be quite flexible while others will only give consent to let in very specific circumstances.
Lenders may charge extra fees for either applying for consent to let or changing from a residential to a Buy to Let mortgage. If you don’t yet know if you want to let out the property immediately or on a long-term basis, but may wish to in the future, then you should apply for a standard residential mortgage with a view to requesting the lender’s approval to rent the property when the time comes. This is usually referred to as “content to let” or “consent to lease”.