IMB Blog

Right to Buy and Qualifying with Bad Credit

The Right to Buy council scheme in the UK allows the council tenants to own a home of their own. Introduced in 1980, the Right to Buy Scheme has allowed millions of eligible tenants to purchase the property they have been living in since long. With the help of Right to Buy mortgages, it is possible for these tenants to own a property of their own. What makes this scheme different from several others is that the tenant would have to pay lesser than what they would have to pay when they purchase the house from open market. The tenants are also entitled to discounts for living in the property for a number of years.

The discount rate that would be applicable would depend on quite a lot of different factors like the residence location, kind of residence etc. Any tenant that lives in a house would be eligible for a 30% discount along with a 1% discount for each year that has been spent residing in the property. For maisonettes and flats, the discount can be anywhere between 44 to 70% not exceeding around GBP 110,000. Only in a rare few occasions the maximum discount rate would be admissible.

Are you eligible?

In order to be eligible for this scheme and to get Right to Buy mortgages in the UK, you will have to be a council tenant. A tenant like this is one who has been living in the property for three years or more in a county council or a body similar to that, housing action trust, registered social association or lender, the London borough council or district council. If you qualify these terms, then you would be eligible for the Right to Buy scheme. However, there would be further eligibility norms for the mortgage, depending on the lender that you approach.

What if you have bad credit?

If you have credit problems or have had issues in the past, there is a chance it could affect the decision on your application for a mortgage. However, there are still things you can check to ensure that you give yourself the best chance of getting your application accepted. Your credit rating may be negatively affected with things like debt defaulting, County court Judgment (CCJ) registered against you, bankruptcy, etc. Less ‘serious’ credit incidents can also hinder your application, things like a late or missed catalogue/ phone contract payment.

A number of changes were introduced in 2015 to make the Right to Buy scheme far more attractive and achievable, especially for those people with bad credit. The scheme is now available to those who have been council tenants for three years, instead of five. Maximum discounts are now around GMP 85,000 or around GMP 110,000 in London.

Finding a mortgage
There are quite a lot of loan companies and banks in the UK that offer these mortgages to borrowers. Lenders realised the necessity of these type of schemes and have designed mortgages that would be suitable for borrowers purchasing a Right to Buy property. Right to Buy mortgages are not very difficult to find in the UK since there are a large number of companies that offer it to borrowers today. A mortgage like this would help you arrange for the funds that you would need in order to purchase the property.

Lender companies use complex scoring systems to evaluate whether you qualify for a mortgage, which are based on a wide range of criteria. Ranges from your affordability every month, to your credit history. If you still feel that your credit rating is going to set back your mortgage application, there are specialist lenders who deal with applicants that have bad credit history, specialising in things like bad credit mortgages. Even if you have been turned down by the high street banks or building societies, it is still possible for you to secure a Right to Buy mortgage deal.

One of the best things about this mortgage is that it would offer to pay the full price of the property which is an added benefit to tenants to take benefit of this scheme. The property can be purchased outright and then can be repaid in easy monthly instalments to the lender. In most cases, the instalments are actually lower than the rent that the tenant would be paying, making it much more affordable. This would be a good opportunity for the tenant to own a property. However, it would be necessary for the tenant to understand the various requirements and the formalities that are involved for getting Right to Buy mortgages in the UK, since the process for getting an approval for this scheme and mortgage is quite lengthy.

To Summarize,

Finding Right to Buy mortgagesis actually not very easy. Even the approval process can take as long as three months. Finding the right loan company from the various options that are available will take some time. It is critical for the tenant to choose the right lender as they will be dealing with the lender for years in the future.

aSo, is it still possible for people with bad credit scores to obtain a Right to Buy mortgage? Yes, in fact Independent Mortgage Brokers are a clear example of a company with great experience insecuring mortgage deals through the Right to Buy scheme,for people with less than perfect credit scores, allowing them to achieve the dream that is to own a home.

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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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