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Shared ownership mortgages with bad credit

Last updated on 7th October 2023 by Martin Alexander

Getting a mortgage with bad credit is possible, even with schemes such as shared ownership. In fact, shared ownership can be a great way of getting on the housing ladder, especially if you have credit problems.

As you buy a share of a property, you can start small and eventually buy a larger share. This is why shared ownership can be a perfect solution for those with bad credit. However, credit issues can get in the way of mortgage approval, so do proceed with caution.

Can I get a shared ownership mortgage with bad credit?

You can get a shared ownership mortgage with bad credit, but approval isn’t guaranteed. Lenders will assess your credit issues to decide whether a mortgage is possible.

Credit is assessed in the following way:

  • Number of credit issues – The more credit issues you have, the harder it will be to get a mortgage. Getting a mortgage shouldn’t be too difficult if you have the odd late payment.
  • Severity of issues – More severe issues, such as bankruptcies and IVAs, will make it harder to get a mortgage when compared to issues such as CCJs and arrears.
  • Dates of your credit problems – Recent credit issues will make it harder to get a mortgage. If your credit problems happened a few years ago, you should be able to apply with most lenders.
  • The share you want to buy – Lenders will assess the share you want to buy and may suggest that you buy a lower share to compensate for your credit problems. This isn’t always the case, but as you’re buying part of a property, you have some flexibility in your application.

What is shared ownership?

Shared ownership allows you to buy part of a property and pay rent on the rest. You’ll get a mortgage for the part you own and pay rent at a reduced rent on the part you don’t own. You can typically buy shares ranging from 25%-75% of the property. For instance, if you had 75% shared ownership, you’d pay rent on the remaining 25%.

The scheme is only open to applicants buying new-build homes or those being sold by housing associations that qualify for the scheme. As the property will be leasehold, you’ll also have to pay service charges and ground rent, an expense to include in your budget.

What are the pros and cons of shared ownership?

Each applicant’s credit file tells an entirely different story. As a result, one applicant can be approved while another is declined. It’s highly recommended that you speak to an advisor before applying for a mortgage. We’ll then let you know if you’re likely to be approved.


  • Shared ownership can help you to become a homeowner
  • Your mortgage may be cheaper than renting
  • Ability to ‘staircase’ and buy more shares in your home
  • Freedom to treat your property as you want, compared to renting
  • Create equity in your property with time
  • Eventually, own your property outright


  • You’ll still need permission to make large changes to your property
  • If you decided to sell your share, you’d have to follow your housing association guidelines
  • Although you may gain equity, the remaining share will also increase in price
  • It may be better to improve your credit score and save a larger deposit
  • Shared ownership properties are leasehold and not freehold

What credit issues can affect a shared ownership mortgage?

It’s possible to get a shared ownership mortgage with the following credit issues:

  • County court judgements (CCJs)
  • Missed payments and arrears
  • Defaults on your credit file
  • After an IVA, bankruptcy or DMP

A bad credit rating doesn’t necessarily mean your credit file is riddled with issues. For instance, a lack of credit can also make mortgage approval difficult.

Read more: Can I get a mortgage with no credit history?

How can I apply for a shared ownership mortgage?

Check if you’re eligible for shared ownership before applying for a mortgage. Qualifying for shared ownership shouldn’t be too difficult, even with bad credit. This is because the scheme will typically assess the circumstances around your living arrangements rather than your credit. After registering for the scheme, speak to an advisor to check which lenders you’re eligible for.

To qualify for the scheme, you must meet the following conditions:

  • Earn less than £80,000 a year as a household (£90,000 in London)
  • You’re either a first-time buyer or an existing shared owner
  • Or, you used to own a home but can’t afford to buy a new one

Your mortgage lender will actively apply for a credit search on your file. Nonetheless, it’s a good idea to check your credit report beforehand. This will give you a better understanding of the issues on your credit file.

What can I do to improve my mortgage application?

You may hesitate to apply for a mortgage if you have credit issues, and that’s completely understandable. With the right help and advice, a mortgage is possible, and your credit may not be as bad as you think. You can even improve your chances of getting a shared ownership mortgage.

  • Check your credit report – If you find anything incorrect on your credit report, inform the credit reference agency before applying for a mortgage. Ensuring your credit file is accurate can save you from problems during your assessment.
  • Register on the electoral roll – Make sure your address details are current. Doing so can improve the health and accuracy of your credit file.
  • Clear any outstanding debt – Lenders tend to avoid applicants with vast amounts of debt, especially with bad credit. The less debt you have before applying can do wonders for your application.
  • Stay well within your credit limits – Don’t borrow when you don’t need to, and try to repay your credit each month in full with direct debit. This can also improve your credit score.
  • Speak to a mortgage advisor – An advisor who has experience with bad credit can be crucial. This is because we’ll assess your entire application to ensure it’s as strong as possible before presenting it to a lender.
  • Apply with a suitable lender – Don’t apply with every lender you can find. Each lender has different criteria more suited to particular circumstances than others. Understanding a lender’s criteria before applying can make mortgage approval much more manageable.

Alternatives to using shared ownership

If you have bad credit, you’re probably searching for the best way to get a mortgage. While shared ownership can certainly be one way of buying a property, there are other alternatives to consider.

If you have bad credit, other alternatives to shared ownership include:

  • Using a guarantor
  • Getting help with a gifted deposit
  • Choosing a different mortgage scheme

Applying with a guarantor

If you have a willing guarantor, lenders may approve you, even with bad credit. This is because the bulk of the risk is placed on your guarantor. That said, your guarantor is taking a big risk, so they must get legal advice before making any commitments.

Read more: What is a guarantor mortgage?

Using a gifted deposit

Your family and friends may be able to gift you a mortgage deposit. This can be a great alternative as you can apply for a regular mortgage rather than shared ownership.

It’s important to understand that gifted deposits don’t give your friends or family any rights to the property. It also needs to be clear and in writing that your deposit is a gift, not a loan.

Learn more: Can I get a mortgage with a gifted deposit?

Choosing a different mortgage scheme

There are different mortgage schemes that you may be eligible for. For instance, the government launched the Mortgage Guarantee scheme in April 2021. This allows eligible buyers to get a mortgage with a 5% deposit.

Other schemes that you may benefit from include:

How can I get help with a shared ownership mortgage?

Anyone applying for a mortgage should seek professional advice from an experienced mortgage advisor. This is especially true if you have bad credit, as you risk being declined, which can knock your credit score further.

Make an enquiry with an expert to check whether you qualify for a mortgage. Furthermore, we’ll also check whether using the shared ownership scheme is a viable option. We may find better alternatives suited to your credit file, which could save you money across your mortgage term.

About the author

Martin Alexander
Senior Mortgage Advisor

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