IMB Blog

Help to Buy Mortgage with Bad Credit

The Help to Buy scheme is a government program set up to improve the property marketand help prospective homeowners to buy new ahouse for the first time. The program includes a loan amount where the state lends money to first-time buyers to finance a newly constructed place.The government provides a loan of up to 20% against the value of the property, interest-free for the first five years. In London, the same loan percentage is raised to 40% due to high property values.

The eligibility criteria of the program are as follows:

  1. You need to be a first-time buyer.
  2. The property should be within the regional price cap.
  3. You should not own any property previously within UK or abroad.
  4. A legal declaration that announces you as a first-time buyer.
  5. The property should be bought from a registered homebuilder.

There are various regional price caps defined by the government. The lowest is North East where the maximum property price cannot exceed 186,100 pounds. The highest price cap is of London that is 600,000 pounds. Other regions such as North West, Yorkshire, East Midlands, West Midlands, South East and South West also have their own price caps that range in between the afore mentioned price limits.

With the loan and a 5% deposit, you can apply for a 75%loan-to-value mortgage(55% in London). This places you in a far better financial position in comparison to without the loan.The loan not only reduces monthly mortgage payments but the debtor also becomes the immediate owner of at least 25% of the property.

Previously, credit score played a vital role in Help to buy program. A Bad Credit Score made it difficult for people to avail the scheme. However, the recent changes in criteria allow people to apply and avail the scheme even without a perfect credit score. According to the Scheme you can apply for the program if you have been discharged from bankruptcy for a year.

Dissolving a bankruptcy means that you are discharged from any and every kind of debt claims. The year that follows acts as a probation period, during which, you are assessed either you are capable of future lending or not. It can be said that it acts as a grace period which can help you to portray that you are now a responsible borrower. Similarly, you need to have an IVA. The individual voluntary arrangement (IVA) allows the lender to understand how you would pay back the conceived loan. It acts as a legal agreement between the lending party and the borrowing party. Since it approved by the court, your lender can only ask for payments as per the prescribed time period by the court. You can have an IVA set up, through a qualified person, that suits your need. You also need to have no mortgage arrears for a year as well. This again indicates that you are a low-risk borrower and would return the money. Furthermore, it indicates that you are in a better financial condition through the course of a year.

Often times the hopes of buyers are shattered by the official statement of the program that clearly states that it dismisses ‘credit-impaired customers’. However, let us assure you that this is not entirely true. If you comply with the above-mentioned requirements that include no bankruptcy, having an IVA and no outstanding payments you can apply for the program as you are not a credit-impaired customer anymore. This means that no one can stop you from availing the scheme as you are in line with the legal protocols of the program. But there is a slight catch. Since you have a history, you would have to go through extra assessment. This commonly is some extra checks and assessment of your financials- income, outgoings and any other financial commitments. All of this is done to ensure that you would be able to pay back that loan alongside your mortgage payment.

The next step after applying for the loan is to find a help to buy mortgage. The process is fairly simple and is a lot similar to any other conventional mortgage program. Our online mortgage advisors can navigate you through the entire process and also provide free mortgage advice. For bad credit situations, unfortunately the procedure is a little complicated. With bad credit score, most of the mainstream lending institutions would reject your application. This is because their institutional guidelines would not allow them to extend a mortgage to a bankrupt person even though the bankruptcy isdissolved. Yet, there are other lenders that specialize in bad credit lending. These institutions or lenders would facilitate you at ease. They would be lenient while assessing your application and past activities would not be an issue if you have shown improvement.

Making a convincing credit file is tough especially with bad credit. Our mortgage advisors can help you with that as they are extremely dedicated and highly trained individuals. They would create your file in such a manner that it blemishes all kind of mistakes that you have made in the past. Furthermore, they would work hard to ensure that you get the best deal as most of the bad credit lenders do not advertise to the public.

To sum it all up, bad credit cannot stop you from getting your own house. You just need to act responsible now. Feel free to contact us anytime through our website at Independent Mortgage Brokers. Our team assures you that you would be served in your best interest.  A bonus tip before leaving, you can always approach the mortgage lenders or the loan program with a greater down payment. This would help you to gain their trust as well as it would reduce the interest rate that in turn would reduce monthly payment.


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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 our Independent Mortgage Brokers 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 advisers working for or with Independent Mortgage Brokers are fully qualified to provide mortgage advice and authorised and regulated by the Financial Conduct Authority. All our independent Mortgage Brokers will offer advice specific to you and your needs and circumstances. 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.

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