With the property market continuing to remain buoyant through the Covid-19 pandemic thanks in part to the extension of the stamp duty break, many people are thinking about either moving home or considering their position on the property market. Despite this, the last 12 months have also seen a huge impact on many people’s personal finances, including redundancies and periods of furlough. Consequently, those with bad credit may feel that they have limited options when it comes to searching for mortgage deals or even applying for right-buy-mortgages.

There are still many options out there for those with poor credit ratings – however they’re not always easy to come by.

In our latest blog post, our experts tackle some of the most frequently asked questions and share their top tips and advice regarding finding an ideal right-to-buy mortgage with bad credit.

What is a right-to-buy mortgage?

Originally launched back in the 1980s, right-to-buy mortgages are specifically designed to enable council tenants to purchase their own homes at a considerable discount. Right-to-buy mortgages make owning your own property substantially more affordable for those who would otherwise struggle to get on the property ladder and as a result, almost 40 years later they remain a popular way for people to purchase their homes.

How much more affordable are right-to-buy mortgages?

There are different discounts for different types of property. If you’re looking to purchase a house, you could be eligible for a 35% discount after three years’ tenancy, whereas if you want to buy a flat the discount could be 50%. Plus, the discount increases the longer you’ve been a resident in the property.

As a result, the discount means that you don’t have to save for a deposit.

Am I eligible for right-to-buy?

If you have been a council tenant for three years, then you are eligible for right-to-buy mortgages. Remember, these three years don’t always have to be consecutive. The property you’re looking to buy also has to be your only residence.

Can I still get a right-to-buy mortgage with a poor credit history?

In short, yes you can. However, it’s important to remember that you may find it more difficult to secure a good deal with a bad credit rating. Lenders are likely to look less favourably on you if you have a poor credit rating, missed payments, County Court Judgements (CCJs) or a large amount of unpaid / bad debt.

Lenders will review a wide variety of criteria when they come to assess you for a mortgage. You may find that if you have a bad credit rating, traditional High Street lenders won’t consider your application. Yet, there are lenders out there who specialise in mortgages for individuals with bad credit, CCJs and other financial problems.

Depending on your credit history we would always suggest seeking the advice of a specialist mortgage broker who would be able to advise and guide you throughout the application process.

How can I help improve my chances of securing a right-to-buy mortgage?

Lenders will always take into account your credit history when assessing an individual application for a mortgage, even with right-to-buy mortgages. The same affordability criteria is taken into account as with any other mortgage application, so you will also be assessed on your income and outgoings.

The services of specialist mortgage brokers will help make the application process much smoother and will highlight the options which may be open to you via specialist lenders.

The first step is to review your credit rating.

As mentioned above, Credit cards, loans and overdrafts also play a role in building your credit rating, but did you know that other credit arrangements also are taken into account within your credit score. For example, do you have a phone contract? Or pay monthly for your utility bills? It’s a good job to check all of these credit arrangements before you start the right-to-buy mortgage application process to ensure that you are on top of your payments and haven’t missed any recently.

Additionally, double check to make sure that all your details on your credit file are correct – this can be easily done via an online credit reference agency.

If you have had past financial issues which have caused an adverse mark on your credit rating, for example CCJs or frequently missed credit card payments, the length of time since they have appeared on your report will affect your chances of successfully securing a mortgage. So if you have recently found yourself with a CCJ, we’d always recommend rethinking your application and consider whether you can wait a few years before going down the right-to-buy mortgage route.

In any situation, we’d always recommend speaking to an experienced mortgage expert. Applying for a right-to-buy mortgage can be a daunting process, especially if you have bad credit. Strengthen your chances of securing a right-to-buy mortgage with bad credit by employing the help of a professional.

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Daniel Peacock.

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