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Right to Buy as a Bad Credit Applicant

Right to Buy is a scheme that has helped countless people purchase their rented property. This guide looks at whether you can apply for Right to Buy if you have a bad credit history.

Almas Uddin
Almas Uddin

Founder and Mortgage Advisor

Almas Uddin2024-07-17
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Can Bad Credit Applicants Apply For A Right-to-Buy Scheme?

Right to buy is a scheme intended to help applicants get onto the property ladder. However, it might be tricky to find a lender who can approve your application if you have a bad credit history.

In this guide, the mortgage advisors team explains how Right to Buy works in an adverse credit scenario and how to improve your mortgage approval chances.

For more information about Right to Buy eligibility with a bad credit rating, get in touch on 0330 304 3040 or via email at [email protected].

Is a Right to Buy With Bad Credit Mortgage Possible?

Right to Buy is the government mortgage initiative that enables council housing or local authority tenants to purchase their home - at prices far below the going market value.

The issue here is that thousands of people might be in a great position to buy that home and call it their own, yet find themselves rejected for mortgage lending, even if they're perfectly eligible for the Right to Buy scheme itself.

Revolution Brokers has compiled this guide to explain how Right to Buy with bad credit works and some of the options to improve your chances of approval.

Don't give up or feel disheartened if your bank has automatically rejected you. We'll explain here why they're the least flexible lenders and the alternatives that may be more viable!

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about your mortgage

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.

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Can I Get a Right to Buy Mortgage With Bad Credit?

Bad credit is always a complication, and your chances of mortgage approval depend on what sort of issues you have experienced and when they happened.

The below table summarises some of the bad credit situations you might have encountered and how significantly they will impact your Right to Buy mortgage application if applying to a high street bank or mainstream mortgage lender.

Credit issue

Impact on a Right to Buy application

Having a low credit score

Likely to be turned down by high street banks - most rely on credit scores with a pre-set threshold.

Late payment history

Usually acceptable provided you have no more than two late payments in the last three years.

Defaults on your credit report

Often rejected by a mainstream provider with any defaults in the last six years.

CCJs (county court judgements)

Highly dependent on the lender policies, depending on when the CCJ was registered.

History of arrears

Applications usually considered if the arrears were three years ago or more.

Debt Management Plans (DMPs)

Depends on when the DMP was registered and whether it has now been settled.

Individual Voluntary Arrangements (IVAs)

Again, relies on the settlement date. Some lenders will accept an IVA applicant, provided it has been settled for 5-6 years.

Bankruptcy

Many lenders will refuse a mortgage if there is any bankruptcy discharged within the last six years.

Repossession

Most lenders will refuse to lend with any repossession history, although some will consider repossessions three years ago.

Should any of these scenarios apply, remember that a bad credit specialist and whole-of-market broker remain in a strong position to help you find a viable mortgage solution - even where a high street bank might not be able to help.

However, you may be able to find a Right to Buy mortgage with bad credit, provided you direct the application to the most suitable lender.

Do I Need a Larger Deposit for a Mortgage for Right to Buy With Bad Credit?

Potentially, yes. A larger deposit offsets some of the risks, and therefore if you have a deposit to offer, it will reduce the borrowing required and make the lender more likely to accept your application.

In some cases, you can get a Right to Buy mortgage with no deposit, even if you have a bad credit history. This relies on finding a lender who can accept your application and consider the Right to Buy discount instead of a deposit.

Lenders have rules about where your deposit can come from.

Likelihood of Approval for a Mortgage For Right to Buy With Bad Credit Depending on Your Deposit Source

Source of your Right to Buy deposit

How likely a mortgage lender is to accept it

Savings account

Very likely

Sale proceeds from another property

Very likely

Capital raised from the equity of another property.

Very likely

Inherited cash

Very likely

A gift from close relatives

Reasonably likely

Sale proceeds of other assets

Very likely

Gifts from more distant relatives

Not as likely

International savings

Reasonably likely

Winnings from gambling

Often not permitted

Gifts from employers

Often not permitted

Personal loan

Often not permitted

Cash

Often not permitted

How Can I Get a Right to Buy Mortgage No Deposit Bad Credit?

Ok, it's evident that having no deposit and a history of bad credit will make your mortgage application a little more challenging, but by no means rules you out of the Right to Buy scheme!

Some lenders will treat the discount you're offered on the property's market value as a deposit.

In effect, it won't matter if you don't have a deposit because the lender knows they're offering you less borrowing than they'd get back if it ended in a repossession situation and they had to sell the property on the open market.

You'll still need to work through affordability checks to show you can afford to keep up with the monthly repayments and select a lender who your bad credit history won't put off, but there are options out there.

How Much Can I Borrow on a Bad Credit Right to Buy Mortgage?

Mortgage providers will consider what you earn, your income's stability, and whether you have any other debts.

If you are on a low income, you can usually borrow up to three or four times your annual earnings through Right to Buy. Some lenders will offer a higher multiple, although that is less likely in a bad credit scenario.

Self-employed Right to Buy applicants will need to provide at least a year's worth of accounts or tax returns, and ideally, three years of trading history.

Lenders then average your profits over those periods to work out an average annual income to calculate the maximum Right to Buy mortgage they can offer.

Right to Buy Mortgage No Deposit Bad Credit - What Are the Other Eligibility Factors?

Besides your credit history, lenders will assess what you want to borrow and how saleable the property would be should they end up in a repossession situation.

Therefore, other considerations include:

  • What property you wish to buy. Any non-standard properties such as timber-framed houses or high-rise flats require a specialist lender.
  • Your age - some lenders have age caps and won't lend to applicants over a specific age.

Expert advice on Bad Credit Right to Buy Mortgages

If you’re interested in applying for a Right to Buy mortgage but have bad credit issues, the best option is to consult an independent whole-of-market broker such as the Revolution team.

We can assess your circumstances, recommend the most suitable lender to apply to, and help with every stage of your application until your mortgage is in place. Give us a call on 0330 304 3040, or drop an email to [email protected].

Almas Uddin
Almas Uddin

Founder and Mortgage Advisor

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FCA disclaimer

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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