Bad Credit Mortgages with the Help to Buy Scheme

Help to Buy is an excellent opportunity to boost your deposit and achieve far better mortgage rates - but can it help if you have a bad credit history? Find out with the Revolution guide, and uncover the opportunities to access mortgage support schemes, whatever your credit position.

About your mortgage

Error: Yearly income income must be between £1 and £10,000,000.

Error: Regular bonus must be between £1 and £10,000,000.

Based on your yearly income, you may be able to borrow:

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Most lenders will let you borrow 4.5 times your annual salary so, as long as you have a standard 10% deposit, you should be able to borrow this much.

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Depending on your personal circumstances, some lenders may let you borrow 5 times your salary.

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Lenders usually cap the amount they lend at 5.5 times your salary, so it’s unlikely you’ll be able to borrow more than this.

This calculator is an estimation of how much you could borrow. If you’re ready to take out a mortgage, speak to a Revolution brokers to see what options are available.

Bad Credit Mortgages with the Help to Buy Scheme

Bad credit is a common problem, and if you're looking to purchase a new build property through the Help to Buy scheme, it might feel impossible to get a mortgage if a high street lender has turned you down.

The good news is that a whole-of-market broker with access to specialist bad credit lenders can help in nearly any scenario.

In this guide, the Revolution team runs through what impact your credit score has on your mortgage application. For more help, and to find Help to Buy lending at the best possible rates, give us a call on 0330 304 3040, or drop an email to info@revolutionbrokers.co.uk.

How Does the Help to Buy Scheme Work?

This scheme is backed by the government and offers buyers the opportunity to take out a low-cost equity loan for up to 20% of the property's value to help them put together a deposit.

Note that the Help to Buy ISA scheme is now closed; although you can use a Lifetime ISA to top up your savings towards a deposit or down payment.

What is a Help to Buy Equity Loan?

If you are interested in the scheme, you will need a 5% deposit - which is often not a viable down payment for many mortgage providers. A 95% mortgage is only available in some circumstances and often carries high-interest charges.

Through the scheme, you can borrow up to 20% via a loan through the Homes and Communities Agency, meaning you have a 25% deposit available.

As an example, to buy a property worth £100,000 you need a £5,000 deposit and can borrow £20,000 through Help to Buy, so your mortgage requirement is reduced to 75% of the property value.

For the first five years, you pay no interest on a Help to Buy loan, although this starts being charged from the sixth year onwards starting at 1.75%. That charge increases with the Retail Price Index, plus 1% every year after that.

Can I Get a Help to Buy Loan with an Adverse Credit History?

Any history of bad credit can make it challenging to find a mortgage. Lenders must go through affordability calculations before making an offer to lend.

However, lender policies vary significantly, and where one lender might automatically refuse an application, another might be happy to lend.

The Help to Buy scheme itself doesn't rely on credit checks (that is only applicable to the mortgage element). To qualify for a Help to Buy loan, you need to be:

  • At least 18 years old.
  • Resident in the UK.
  • A first-time buyer, or looking to buy a new-build as your primary residence.

There is a caveat in that Help to Buy excludes applicants considered 'credit impaired'. That applies to those with severe credit issues or pending legal action, and it's still possible to find mortgage lending in any of the below scenarios:

  • Low credit score, or no credit score.
  • History of late payments or arrears.
  • Defaults or CCJs.
  • Records of a DMP or IVA.
  • Bankruptcy or repossessions.

In more severe circumstances, it is vital to work with an independent broker who can negotiate with bad credit lenders on your behalf.

Can I Get a Help to Buy Mortgage if I have Declared Bankruptcy?

Bankruptcy is a challenging credit history issue, and many lenders will refuse to lend to any such applicant.

However, Help to Buy can help, depending on when the bankruptcy was registered, and when it was discharged.

Some lenders will make an offer, but need a higher than usual deposit, and will not offer the most competitive interest rates.

In a bad credit scenario, or if you have been bankrupt in the past, give us a call, and we'll advise on the best options to secure the Help to Buy lending you are seeking.

How Much of a Difference to my Help to Buy Application Does my Credit Score Make?

The issue with adverse credit is that it drives up the perceived risk of lending to you. Lenders always use risk as a benchmark to decide whether they can make an offer.

Typically, a Help to Buy lender can offer a mortgage up to around three or four times your annual income. Other lenders can stretch to five or even six times your annual earnings, provided you meet all their other criteria.

In most cases, if you have a bad credit history the lender won't be able to extend their affordability calculations, so you're likely to be able to borrow a smaller amount, based on a lower multiple of your yearly income.

As an illustration, the below table shows how income multiples are calculated, how much that means you could borrow on a  £25,000 salary, and what sort of repayment you might be looking at over a 25-year mortgage term.

Income calculation

Maximum mortgage

Monthly repayment cost

Three times income

£75,000

£356

Four times income

£100,000

£474

Five times income

£125,000

£593

Professional Advice with Bad Credit Help to Buy Mortgages

If you have a bad credit history, that does not mean that you cannot take out Help to Buy lending - but does mean that an experienced broker is essential.

Our teams can assess your circumstances, identify the right lenders to apply to, and help you secure competitive mortgage lending.

As a whole-of-market broker, we can recommend any product from any lender, and have access to off-market products and new lending offers that can save a substantial amount of money over the lifetime of a mortgage.

Give mortgage advisors a call on 0330 304 3040, or drop an email to info@revolutionbrokers.co.uk and we'll get your mortgage application process started!

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The content included in our articles, blogs, web pages and news publications is based on information accurate at the time of writing. Note that policies and criteria can change regularly throughout the UK mortgage lending market, and it remains essential to contact the consultation team to receive up to date guidance. The information included on the Revolution Brokers site is not bespoke to any circumstances or individual application scenarios and therefore is not intended to be used as financial advice. The content we share is designed to be informative and helpful but cannot be relied upon to provide individual advice relevant to your mortgage requirements. All Revolution team members are fully qualified, trained and experienced to provide mortgage advice of an independent nature. We collaborate with lenders and providers who are regulated, authorised and registered with the Financial Conduct Authority (FCA). Should you require specific mortgage borrowing types, some products such as buy to let mortgages may not be FCA regulated. The Revolution team can provide further information about regulated and unregulated lending as required. Please remember that a mortgage is a debt which is secured against your home or property. Your home can be at risk of repossession if you do not keep up with the repayments or encounter any other difficulties in managing your mortgage borrowing responsibly. This also applies to any remortgage or home loan secured against your property, including equity release products.

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