Adverse Credit Mortgage Help to Buy  – What you need to know

Adverse credit mortgages and Help to Buy are two things that clients often ask about – but can you combine the two? We’ll explore the options for you to buy a home.

What is a Bad/Adverse Credit Mortgage?

If you have a poor credit history it can be tricky to get a mortgage, but it’s not impossible. There are a few ways you may be able to buy a home if you have adverse credit – but the options will depend on what’s led to your poor credit rating.

Your credit report is a record of your previous financial dealings, giving lenders an idea of how reliable you have been in repaying previous debts.

What are the causes of adverse credit?

If you have always stayed in credit with your bank and paid loans, credit cards and utility bills on time, your credit rating should be good. 

Issues that can give you a poor credit rating include:

• Going over your overdraft or credit limit
• Missing payments on a finance package or a mortgage (falling into arrears)
• Defaulting – failing to pay back money by a set deadline
• Receiving a County Court Judgement (CCJ)
• Entering a Debt Management Plan
• Individual Voluntary Arrangements (IVA)
• Bankruptcy
• Having items repossessed

What is Help to Buy?

The government brought in the Help to Buy  Equity Loan as a way to help First Time Buyers afford a home, in a market where property prices make it challenging to save up a big enough deposit. Help to Buy is only available on a new build home.

To qualify you will need a deposit worth 5% of the property value. The government then lends you up to a further 20% to put down as a deposit. There’s no interest to pay on the government loan for the first five years, and you will need to get a mortgage deal for the remaining 75% of the value.

As long as you’re a First Time Buyer and are buying an eligible new build home, you should qualify for Help to Buy. The challenge can be to find a lender to give you the remaining mortgage. 

There are also other government home buying schemes that might be useful to you. These include Shared Ownership and Right to Buy.

Use a mortgage calculator to work out how much you might be able to borrow and what size of deposit you will need. 

Can you apply for a Help to Buy Mortgage if you have adverse credit?

People with adverse credit often think that finding a Help to Buy mortgage will be impossible, but that’s not necessarily the case. While it does depend on how serious your credit issues are, there are many specialist lenders out there who may well be able to offer you a loan.

How do I Improve my Credit Score?

There are a few quick wins to improve your credit file. First check that you’re on the electoral roll – it’s a basic requirement for credit. 

Beyond that, generally you’ll improve your credit rating by keeping your bank account in credit, paying all bills on time and clearing the balance on your credit card. Staying at the same address for 12 months or longer can help too. Wait a few months before applying for a mortgage, when your credit situation is better.

How Can A Mortgage Broker Help?

Most First Time Buyers find the support of a Mortgage Broker really valuable. We’ll help you with setting your budget, finding a mortgage, applying and chasing up all the people involved in your property chain. 

We’re here for all your questions too. We’ll explain everything you need to know about the credit check, the Help to Buy process, the mortgage application and more. We love helping people buy their first home, so get in contact today. We’re open Monday to Friday, 9am to 5pm – give us a call.

Spot On Mortgages Ltd are an Appointed Representative of TenetLime Limited, which is authorised and regulated by the Financial Conduct Authority. We are registered in England and our registered office is in Portishead, Somerset. 

A mortgage is a loan secured against your home. Your home may be repossessed if you do not keep up repayments on your mortgage. Think carefully before securing other debts against your home.