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Help to Buy mortgage with bad credit history

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HomeFirst Time BuyersHelp to Buy mortgage with bad credit history

Help to Buy mortgage with bad credit history

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Last reviewed on 11th October 2023 by Martin Alexander (Mortgage Advisor)

Important: The Help to Buy equity loan scheme ended in England in March 2023 and is no longer open to new applications.

A Help to Buy mortgage can enable you to buy a home with some pretty good perks, but what does it all mean if you have bad credit?

There’s certainly nothing wrong with applying for a Help to Buy mortgage if you have credit problems. You’ll need to meet your lender’s requirements, so checking whether you qualify before approaching a lender is recommended.

Our advisors can check if you qualify for a Help to Buy mortgage with bad credit. Our specialists have helped many applicants with credit issues and even those who have been declined elsewhere.

Can I get a Help to Buy mortgage with bad credit?

You can get a Help to Buy mortgage with bad credit, but you’ll still need to meet the rest of your lender’s criteria.

Lenders will assess your mortgage on the following factors:

  • Date of your credit problems
  • The severity of your credit issues
  • Affordability (income/outgoings)
  • Deposit amount

Lenders will want to establish your credit issues and the date they took place. For instance, credit issues within the last twelve months will make getting a Help to Buy mortgage more difficult. On the other hand, credit issues over six years ago shouldn’t affect your application.

Is shared ownership possible?

Applying for shared ownership with bad credit can be quite straightforward. This is because you can choose the share you’re purchasing. For instance, some lenders will allow you to buy a 75% share of your home, whereas others may only allow up to 50%.

The share you can buy in a home typically depends on the amount you can borrow. Each lender calculates mortgage affordability in a unique way. This is why it’s important to approach only the most suitable lenders. You could be declined if you approach a lender that isn’t suited to your circumstances.

Read more: Can I get a shared ownership mortgage with bad credit?

Which Help to Buy scheme should I apply for?

The Help to Buy schemes that are currently available are:

The good news is that Help to Buy schemes can be used alongside bad credit. This is subject to meeting a lender’s criteria.

Help to Buy: Equity Loans

You can no longer apply for the equity loan, but eligible buyers could purchase a new-build home with a 5% deposit. The government would then top the deposit up with an equity loan of 20%. 40% equity loans would be approved if the property was in Greater London.

Equity loans were interest-free for the first five years, which is also a great incentive.

Help to Buy: Shared Ownership

Shared ownership allows you to buy a share of a property. This is quite useful when you can’t buy 100% of the property value.

The share you can purchase usually ranges from 25% to 75% of the overall property value. You’d then pay rent on the remaining share you don’t own. The rent is typically paid to a local housing association.

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Which credit issues are possible with Help to Buy?

Help to Buy is possible with the following credit issues:

  • Late payments and arrears
  • CCJs
  • IVA
  • Defaults
  • Bankruptcy
  • Repossession
  • Debt Management Plan (DMP)

Lenders will assess whether or not your mortgage will be affordable and whether or not you’re considered to be high-risk due to having bad credit. Each credit issue can affect your application differently, so it’s advised to seek specialist advice before applying.

Mortgage lenders also have different views on bad credit. As a result, some lenders may be better suited than others. For instance, some lenders may be more relaxed about having a CCJ, whereas others may be better suited if you have defaults.

Help to Buy mortgage advice for bad credit

Getting the opinion of an advisor is beneficial in circumstances that involve poor credit. Specialists can approach lenders based on your affordability and credit issues. This ensures you get the best deal and apply with lenders likely to say yes. Speaking to a specialist can also save you a lot of money over the years.

In situations such as shared ownership, you may find a lender willing to give you a larger share of the home you’re buying. There’s a considerable difference in owning 25% of your home compared to 75%.


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About the author

Martin Alexander
Senior Mortgage Advisor | More Articles

Martin is a senior mortgage advisor and has held a CeMAP qualification for over 15 years while also completing an MBA in Global Banking & Finance.