Pete Mugleston | Mortgage AdvisorPete has been a mortgage advisor for over 10 years, and is regularly cited in both trade and national press.
Updated: 21st January 2020 *
Am I eligible for a Right to Buy mortgage with bad credit?
“Can I get a Right to Buy mortgage if I have adverse credit?” Yes, you can!
We receive hundreds of enquiries from customers who want to get onto the property ladder, but whose applications have been declined by previous lenders due to historical credit issues.
Some of these enquiries come from those wanting a Right to Buy (RTB) mortgage with bad credit.
Lenders can be very picky about who they loan money to, and adverse credit can ring warning bells. However, just because you’ve been declined a mortgage in the past, this doesn’t necessarily mean all hope is lost.
Whole of market brokers like the ones we work with can put you in touch with the most suitable lender(s) to suit your needs.
So, if you’ve been declined an RTB mortgage due to historical credit issues previously, contact usand we’ll hook you up with the best Right to Buy mortgage lenders specialising in bad credit.
How does bad credit affect eligibility got a Right to Buy mortgage?
As with all instances of bad credit, it’s very much dependant on individual circumstances. The most important factors lenders consider is the type of credit issue, and the date the issue is registered.
Here, we’ll be delving deeper into the most common forms of adverse credit (ranging from least - highest risk) you may have been faced with as a borrower, and how each case can impact your eligibility to be accepted for a RTB mortgage:
Bad credit issue
How might this affect your application?
Right to Buy mortgages with low credit scores
Many high street lenders are likely to decline your application if you have a bad or low credit score. Some don’t “score”, they “check”; to make sure the rest of your credit profile meets their criteria even if your score is rock bottom.
Right to Buy mortgages with late payments
Most lenders accept a couple of late payments if they occurred over three years ago. Some may accept if they occurred during the last 12 months, and a few will accept if you are currently behind on payments.
Right to Buy mortgages with defaults
Most high street lenders will decline if the instances have been made within six years, some will consider if outside of the last three years, several are happy if registered outside the last 12 months, and a few will consider if they have been registered within the same month. Specialist lenders are more accommodating around communications defaults.
Right to Buy mortgages with County Court Judgements (CCJs)
Criteria is much the same as with defaults, although some lenders are less accepting of CCJs.
Right to Buy mortgages with arrears
Most lenders will consider you if the instance(s) occurred over three years ago, some are happy if over 1 year, a few may accept if it occurred within the last 12 months, and a small handful will consider you if you have current arrears.
Right to Buy mortgages with Debt Management Plans (DMPs)
The main factors here are the registration and settlement dates. Most lenders will decline if you’ve had a DMP in the last 6 years. Some are happy if it has been settled for three years, a handful will consider you if you have a one currently as long as you have been maintaining the payments in the plan.
Right to Buy mortgages with Individual Voluntary Arrangements (IVAs)
Again, the key factors are registration and settlement dates. Most lenders will decline if an IVA has been settled within the last six years, but some will consider if settled within five. A few will accept if settled over three years ago, and a handful will consider you if you are currently in an IVA.
Right to Buy mortgages and bankruptcies
The bankruptcy discharge date is the most significant concept at play. Most lenders will decline you if you’ve ever had one, some will accept you if you’ve been discharged after six years, others over three. A limited number will consider you if have been discharged over 12 months, and one or two may even accept after day one of discharge.
Right to Buy mortgages and repossessions
Again, the date of the of repossession is the most important consideration. The majority of lenders will decline if you’ve ever had one, but some are happy to accept if the repossession instance occurred over six years ago. A few will consider if it was within three years, and a handful may accept it has occurred within the last three years.
The information in the above table was accurate at the time of writing but criteria has a tendency to change over time. For up-up-to-date information, make an enquiry to speak with an expert advisor over the phone today.
In a nutshell, the more severe and more recent the instance occurred, the more it is likely to affect your right to buy application being accepted, and the more likely you are to be offered a subprime mortgage rate.
The most important thing to keep in mind, though, is that bad credit doesn’t necessarily mean you can’t get a mortgage with favourable rates. Make an enquiryand the advisors you work with will connect you with a lender who specialises in borrowers with adverse credit.
How much deposit do I need for a Right to Buy mortgage if I have credit issues?
Depending on the credit issues you might not need any of your own “cash” deposit to put down as you are effectively getting equity against the open market value from the discount you receive as part of the right to buy scheme. If you have your own deposit to add to the discount then it will help reduce the amount you need to borrow and can improve the rate your are offered.
Can I get a Right to Buy mortgage with no deposit?
What if you want a right to buy mortgage but have no deposit available? As we’ve established, having a history of bad credit (depending on the number of instances, severity and recency) will put you into a higher risk bracket. The higher risk your circumstances, the more wary lenders are, and, usually, the more deposit is required so as to instil the lender with the confidence in your ability to keep up with the repayments.
It’s difficult to say exactly how much deposit you will need, as it is dependant on so many different circumstances and will vary lender to lender. Talk to us today and we’ll point you towards an advisor that can assist you based on your specific circumstances.
Deposit sources for Right to Buy mortgages
As well as how much deposit you will require for an RTB mortgage, where it is sourced is another important factor lenders will inquire about. Some sources are seen as higher risk than others, and can restrict your options when it comes to providers.
If you (and your partner, if applicable) have low income, the majority of providers are only willing to loan you three to four times your annual income for a RTB mortgage - although there are a few lenders out there that will accept up to five or six times your income, depending on the circumstances.
Lenders are gradually becoming more open to lending to the self employed, but even in “normal” circumstances you will usually be required to supply a minimum of one year’s worth of filed accounts (a handful of providers accept as little as nine months) in order to be considered by a limited range of mortgage providers.
Most lenders feel more comfortable if you have 3+ years of books to prove you have a reliable form of income, but if you have instances of bad credit against your name (again, depending on recency and severity), some might require more years’ worth of books, or may insist on a higher deposit to minimise the risk.
Other factors affecting getting a Right to Buy (RTB) mortgage
We’ve covered the more common factors impacting a buyer’s eligibility for a Right to Buy mortgage if there are bad credit issues against their name.
Basically, the higher perceived risk a borrower poses (e.g. higher loan to value (LTV), recent / severe credit issues and poor affordability), the fewer lenders you’re likely to have access to, which potentially means higher rates and deposit requirements. And of course, having multiple instances are likely to restrict your options even more.
There are a few other less commonly known factors to consider which can further impact eligibility, including:
The property type: If the property you’re buying has any elements of non-standard construction (e.g. high rise flats, concrete panels, timber frame), a specialist lender might be required to make sure you get the best rates. You can read more about non-standard construction mortgages here.
Your age: If you’re looking for a Right to Buy mortgage in retirement, your choice of lenders could be fewer as most providers won’t offer a mortgage to anyone over 75. Others stretch to 85 and a minority will lend with no upper age limit, as long as they’re convinced you can meet the payments.
Speak to a Right to Buy mortgage expert today
If you’re seeking a bad credit Right to Buy mortgage, call Online Mortgage Advisor on 0808 189 2301 or make an enquiryhere.
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 no obligation or marks on your credit rating.
*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 info 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.
Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes.
The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.
Pete's presence in the industry as the 'go-to' for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!
Read more about Pete here...