Help to Buy Mortgages with Bad Credit

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Home » Mortgages » Help to Buy Mortgages with Bad Credit

Help to Buy Bad Credit Mortgages

As expert Help to Buy mortgage brokers for people with bad credit, we help clients to access an exclusive range of products from specialist lenders.

What is Help to Buy?

The Help to Buy scheme is a Government initiative set up to stimulate the housing market and help first-time buyers and existing homeowners purchase new build properties to live in. The scheme offers an equity loan where the government lends first-time buyers and existing homeowners money to buy a newly-built home. The purchase must be no more than £600,000. You can borrow 20% of the purchase price interest-free for the first five years, as long as you have at least a 5% deposit. If you live in London, you can borrow up to 40% of the purchase price. Payments on this Government loan will only begin after 5 years when you will pay the interest only. Only new build properties under the value of £600,000 qualify for this scheme, with a requirement of a 5% deposit.

The 20% Government loan (40% in London) obviously reduces the initial mortgage repayments significantly. At the end of the mortgage term, or if the house is sold then the Government loan needs to be repaid.

Who can get a Help to Buy Mortgage?

To qualify for the high street lenders you need to have a good credit score, however some clients have unfortunately had some bad credit in the form of missed payments, defaults and county court judgements. We have lenders who will provide bad credit mortgages to clients wishing to purchase a property through the Help to Buy scheme. This really is a specialist area and you need to speak with mortgage advisers who are experienced in this field, just like The Money Hub team.

Most people will be eligible to apply for the scheme if they meet the following criteria:

  • You are a first time buyer or a homeowner looking to move
  • You do not own any other properties
  • The home you want to purchase is a new build
  • The purchase price of the property is not higher than £600,000
  • You have a 5% deposit which can be a gift from your family

It is a good idea that you get a copy of your credit report from agencies such as Experian and/or Equifax and this will show you a detailed report of all your credit commitments over the last 6 years that you have had along with your payment conduct plus any County Court Judgments/IVA or Bankruptcy that you may have had.

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

Initially when the scheme was first introduced by the Government, the chances of you obtaining a Help to Buy mortgage with bad credit was pretty slim. Fast forward to now and there are plenty of specialist mortgage lenders for bad credit who can provide Help to Buy mortgages.

The team at The Money Hub are here to assist with people who have a bad credit history to obtain a Help to Buy mortgage. So whether you have missed payments in the past, have mortgage arrears or have experienced bankruptcy, we are here to help you.

We have a team of mortgage advisers that can consider and advise on your individual position and circumstances as to the most suitable help to buy mortgage scheme that is appropriate for you.

The Advantages of the Help to Buy scheme

  • You only need a 5% deposit to purchase a property and this deposit could be from savings or gifted from close family
  • By purchasing a property you have potentially more long term stability whereas if you were renting you may have to move several times through no fault of your own
  • Paying for a mortgage and the equity loan (after 5 years) may be cheaper than renting

The Disadvantages of the Help to Buy scheme

  • If you were to staircase and pay off all or an element of the equity loan, this will be linked to the current property value and may cost you more
  • You can only staircase a minimum of 10%
  • For the first 5 years you do not pay anything towards the equity loan, however in year six you have to pay the interest at 1.75% and then the rate increases every year after that at the RPI (Retail Prices Index) measure of inflation plus 1% until the loan is paid off. This is on top of the mortgage payments you have to make
  • The payments that you make on the equity loan are only interest payments, so the balance is not going down

Regional Price caps for the Help to Buy scheme

If you are considering obtaining a mortgage using the help to buy scheme it is worth knowing that there are regional property price caps in place as follows:

  • North East: £186,100
  • North West: £224,400
  • Yorkshire and the Humber: £228,100
  • East Midlands: £261,900
  • West Midlands: £255,600
  • East of England: £407,400
  • London: £600,000
  • South East: £437,600
  • South West: £349,000

Securing a mortgage with bad credit is possible (depending upon how much bad credit and when registered) and a lot of lenders that help clients with adverse credit registered don’t use a credit scoring system. To find out the availability of mortgages for yourself you should speak to a qualified, experienced mortgage brokerage such as The Money Hub who are authorised and regulated by the Financial Conduct Authority.

Where can I find New Build properties?

Using property portals such as Rightmove &/or Zoopla you should be able to identify possible properties. Once you have viewed a property that you would like to buy you may have to pay a reservation fee (normally no more than £500) to hold the property.

You will need to apply for the equity loan and get an ‘authority to proceed’ before applying and securing a mortgage. If have credit issues & a low credit score it is worth speaking to a mortgage adviser before viewing properties to ensure you can get a mortgage with bad credit.

Contact the bad credit Help to Buy Mortgage professionals today

In order to obtain a Help to Buy mortgage with bad credit, your specialist mortgage advisor may have to seek a specialist lender. Specialist lenders can offer mortgages to borrowers who have a bad credit history by providing products to suit your needs.

To find out more on how to obtain a Help to Buy mortgage and how we can help you, please get in touch with The Money Hub team today.

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Help to Buy FAQ’s

Most of your high street banks and building societies offer help to buy mortgages. To qualify for a high street lender you will need to have a good credit score, however some building societies will rely upon your credit profile rather than your credit score although you still will need to have a good payment record. If you have had some bad credit in the past there are specialist lenders available who offer their products through mortgage brokers who will consider providing you with a help to buy mortgage.

There are lenders that will lend to clients that have bad credit registered. The availability of these mortgages will depend upon when the bad credit was registered, what type of bad credit was it, i.e. loan, credit card or mobile contract for example, how much was the bad debt and has it since been satisfied. You should review your credit report before applying for a mortgage and where possible try to resolve any credit issues.

You will always need to put down a deposit of 5% yourself and this could come from savings or maybe gifted from close family. The government will then lend to you up to 20% (or 40% in London) and then the remaining 75% (or 55% in London) you can take out a mortgage for. You will need to pass the mortgage lenders affordability assessment and also make sure you pass the Help to Buy eligibility and affordability criteria. A mortgage broker will walk you through the steps to obtain a mortgage starting with getting an Agreement In Principle arranged.

There are several lenders in the market who can help clients obtain a mortgage if they have credit issues such as missed payments, defaults and CCJ’s. Lenders such as Bluestone Mortgages, Kensington & Vida Homeloans maybe able help and you will need to go through a mortgage broker to access these products.

A help to buy mortgage application maybe declined if you fail to pass the affordability assessment &/or you have adverse credit registered which is above the lenders allowable limits. Speaking to an experienced broker is key to determine from the start whether you can secure a mortgage.

Related Information

Bad Credit Mortgages

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