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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 26th July 2022

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 with bad credit history. That being said, you’ll want to make sure you meet your lender’s requirements. It’s also a good idea to check whether you qualify for the scheme before approaching a lender.

Our advisors can check if you qualify for a Help to Buy mortgage and it may well be possible, even with bad credit. Our specialists have helped many applicants with credit issues and even those that have been declined elsewhere.

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

Lenders will assess your mortgage on the following factors:

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

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

Shared ownership mortgage with bad credit

Applying for a shared ownership mortgage with bad credit can be quite simple. This is because you can choose the share you’re purchasing. For instance, certain lenders will allow you to purchase a 75% share of your home, whereas other lenders 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. If you approach a lender that isn’t suited to your circumstances, you could be declined.

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

Help to Buy: Equity Loans

A Help to Buy: Equity Loan allows eligible buyers to purchase a new-build home with a 5% deposit. The government will then top the deposit up with an equity loan of 20%. If the property is located within Greater London, then you may qualify for an equity loan of up to 40%.

Equity loans are interest-free for the first five years which is also a great incentive. It’s also possible to get an equity loan with bad credit, but it can be difficult.

Help to Buy: Shared Ownership

Shared ownership allows you to buy a share of a property. This is quite useful when you’re unable to 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 that you don’t own. The rent is typically paid to a local housing association.

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Which Help to Buy lenders accept bad credit?

Help to Buy lenders that accept bad credit will consider the following:

  • 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 in a different manner, 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, certain lenders may be more relaxed when it comes to having a CCJ, whereas other lenders may be better suited if you have defaults.

Help to Buy mortgage advice for bad credit

Getting the opinion of an advisor can be very beneficial in circumstances that involve poor credit. Specialists are able to approach lenders based on both your affordability and credit issues. This is to ensure you’re getting the best deal and to apply with lenders that are 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 that’s willing to give you a larger share of the home you’re buying. There’s a huge difference in owning 25% of your home in comparison to 75%.

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About the author

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.