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By Pete Mugleston | Mortgage Advisor

Pete has been a mortgage advisor for over 10 years, and is regularly cited in both trade and national press.

Updated: 18th February 2021*

Help to buy with bad credit

We get lots of enquiries from people who ask “Can you get a help to buy mortgage with bad credit?” Many of the people we have helped have previously been told that their bad credit will prevent them from being able to get a Help to Buy mortgage.

This is often incorrect and in many cases, getting a Help to Buy mortgage with bad credit may be possible, even if you have been turned down by other lenders.

In this guide, we have gathered all the key information you’ll need to know about Help to Buy and bad credit including:

If you are looking for professional advice about how to get a Help to Buy mortgage with bad credit, speak to an advisor.

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What is a Help to Buy?

Help to Buy is a government backed mortgage scheme in the UK that aims to help first time buyers or homeowners looking to move home.

Two common schemes within Help to Buy are:

Unfortunately, the Help to Buy: ISA scheme is now closed to new applicants. However, this doesn’t mean that there are no schemes to help first-time buyers – a Lifetime ISA works in a very similar way.

Help to Buy: Equity Loans

With an equity loan, the buyer is only required to raise 5% of the property value as a deposit. The government will then provide a further loan of up to 20% through the Homes and Communities Agency (HCA).

For example, if the property you would like to buy is worth £100,000, you’ll need a £5,000 (5%) deposit. The government will then loan you the other £20,000 (20%) so you can put down a larger deposit and buy the property.

A benefit of a Help to Buy: Equity Loan is that for the first five years, it’s interest-free. In year six, you will be charged an interest rate of 1.75% which will climb at a rate of 1% of that figure plus any increase in inflation.

Help to Buy: ISAs

*UPDATE: The Help to Buy ISA scheme is now closed to new applicants. For more information, read our guide.

If you are saving to buy your first home, you can save money into a Help to Buy: ISA and the Government will boost your savings by 25%.

This means that for every £200 you save, you will receive a government bonus of £50. Note that this is capped and the maximum government bonus you can receive is £3,000 per person.

Do you need a good credit rating for a Help to Buy: ISA?

*UPDATE: The Help to Buy: ISA scheme is now closed to new applicants.

For a Help to Buy: ISA, there are no Help to Buy credit checks or affordability criteria to be met as you are saving money as opposed to borrowing it, so any bad credit you have will not affect your likelihood of being able to open a Help to Buy: ISA.

To qualify for a Help to Buy: ISA, you must:

  • Be aged 16 years or over
  • Be a UK resident
  • Be a first time buyer
  • Not have another active cash ISA in the same tax year

Can you get a Help to Buy Equity Loan to buy a house with bad credit?

Bad credit can affect your chances of approval for a Help to Buy mortgage and your lender will want to assess your credit history as well as your affordability when deciding if they can approve your application.

That being said, the credit checks are applicable to your mortgage and not for the government Help to Buy: Equity loan itself.

To qualify for a Help to Buy: Equity loan, you must:

  • Be aged 18 years or over
  • Be a UK resident
  • Be a first time buyers or a homeowner looking to move
    must not own any other property

Can you have a Help to Buy: ISA and then apply for a Help to Buy: Equity loan?

Yes. If you meet the eligibility criteria for both schemes, then it is possible to use your Help to Buy: ISA to save for a deposit and then apply for a Help to Buy: Equity Loan for the rest of your deposit.

Are there Help to Buy mortgage lenders that accept bad credit?

Yes. There are specialist lenders who are more willing to lend to approve a mortgage for borrowers with adverse credit, as well as those who are self employed or have more complex income.

Although the Help to Buy: Equity Loan scheme excludes ‘credit impaired customers’, borrowers with less severe bad credit may be able to obtain a mortgage under the Help To Buy scheme.

These include:

For more information on how to get a Help to Buy poor credit mortgage or for more information about the Help to Buy scheme and how bad credit can affect your application, contact a bad credit mortgage specialist.

Can you get a Help to Buy mortgage after bankruptcy?

Bankruptcy is a very severe form of credit to have on your report and most lenders have policies that prevent them from lending to customers with this. However, some lenders are happy to provide a Help to Buy mortgage for customers who have been bankrupt, once they deem them eligible.

The point at which you’ll become eligible really differs lender to lender though. A few are happy to offer you a Help to Buy bad credit mortgage as soon as you have been discharged but this can often come with unfavourable conditions including a large deposit and a high interest rate.

Because of this, it’s best to speak to one of the mortgage advisors we work with who has experience in Help to Buy mortgages for people with bad credit. As well as being able to offer you a free Help to Buy credit score, they’ll also be able to search the market and put you in touch with lenders who are more likely to accept you.

Talk to an advisor for more information and advice on this.

How does bad credit affect how much you can borrow on a Help to Buy mortgage?

Adverse credit may affect your maximum affordability because lenders will see a history of missed payments or other forms of bad credit as a risk.

Usually most lenders cap their loans at 34x your income, although some lenders may consider loaning 5x your income, in the right circumstances.

For someone with bad credit, most lenders are likely to cap the loan at smaller multiples of your income so your monthly mortgage repayments are lower and therefore easier to keep up with.

See below for an example of how income multiples can affect the amount you borrow and your monthly repayments on your mortgage:

Income Multiples Loan Amount Monthly payments (mortgage term of 25 years)
x 3 £75,000 £356 (40%)
x4 £100,000 £474
x5 £125,000 £593

Why you should speak to an advisor about Help to Buy mortgages and bad credit

A mortgage advisor’s advice is invaluable, especially if you have bad credit and need advice on which lenders to turn to for the best chance of approval for a Help to Buy mortgage.

A lot of mainstream lenders lack the specialist knowledge needed to properly assess your Help to Buy mortgage application and often they turn bad credit borrowers away because they don’t know the lenders to refer them to.

We’ve helped over 120,000 people find the right mortgage, even those who have been previously declined or have bad credit. In fact, our customers consistently rate us 5 stars on Feefo, mainly because of our outstanding service, but also because we  only work with qualified advisors who are:

  • Whole of market brokers, including specialist bad credit mortgage advisor
  • OMA Accredited
  • Qualified after completing a 12 module LIBF accredited training course

Contact an expert about Help to Buy with bad credit

If you have questions about the Help to Buy scheme bad credit and want to speak to an expert for the right advice, call Online Mortgage Advisor today on 0808 189 2301 or make an enquiry.

Then sit back and let us do all the hard work in finding the broker with the right expertise for your circumstances.  – We don’t charge a fee and there’s absolutely no obligation or marks on your credit rating.

Updated: 18th February 2021
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FCA disclaimer

*Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.