What is Right to Buy Mortgage in the UK

Back in 1980, the government introduced the Right to Buy scheme for the tenants in England who were renting on council properties for the next five years. Since then, there are around two million council properties that have been bought. That means more people own houses now instead of just renting. This is similar to a rent to own scheme where you can rent a house and it can be yours after you were able to pay the mortgage in full.

What is a Bad Credit Mortgage?

A bad credit mortgage basically means that people can still take advantage of the Right to Buy scheme even if they have bad credit. Most of the time, you will not even be qualified for a mortgage if you did not meet the credit criteria. If you belong to the low-income group, it will make it impossible for you to own a property. But the good news is, you can take advantage of the Right to Buy scheme. It's better instead of just letting your money be wasted since you will still end up not owning the place that you currently live in.

However, if you have bad credit, don't expect that you will get the same rates as people with an excellent credit score. It will be higher but still manageable though. But if you can provide a higher deposit, that might adjust the rates for the mortgage that you're applying for. You can always ask for the mortgage company's assistance so that they can provide a better option for you.

What is Right to Buy

The Right to Buy mortgage with bad credit is one of the changes that has been implemented by 2015. It's giving more ways for tenants to buy the house that they are living in even if they don't have a high credit score. Instead of being in a council property for five years to be eligible, they made it to only be three years. That also comes with a maximum discount of £77,900 or £103,900 in London.

It's a great opportunity to finally own a home instead of just seeing your rent money down the drain. You can also sell the house in the future for future profit. Or pass it on with your children as an inheritance. Although for those who are low-income earners as well as people with bad credit, it sounds harder as it seems.

Right to Buy Mortgage

It's good to know that there are more lenders now who got into the Right to Buy mortgage market. They can help people with bad credit scores so that they can get the financing they need to buy their own homes. Although bad credit can still give you a chance to get a mortgage, the rates may end up higher compared to those who got a good credit history.

Impact of Bad Credit History from Getting a Mortgage

1. Repossession

If you have repossessed cases, most lenders will automatically decline your mortgage application. Although some lenders may consider your application, it will be subject to some conditions.

2. Bankruptcy

Even if your bankruptcy file has been discharged, it will take some time for lenders to consider assisting you with your mortgage application.

3. Arrears

Some lenders will already be considerate enough if you had some arrears 3 years ago. However, if you happen to have a mortgage area, you will be more likely to get declined.

4. Debt Management Plan

If you're into a Debt Management Plan or Involuntary Arrangement, very few lenders might consider. But you can get better chances if it happened 3 years ago. You can even get more lenders to assist you with your mortgage.

5. Default

If you have defaults or CCJ, you will have difficulty finding a lender but after a few weeks, you might find one already. It's even better if you have a default 3 years ago.

6. Late Payments

If you have a habitual late payments record, you will less likely to find a lender to assist you. Although if it happens just a very few instances, some lender might consider.

7. Other Reasons

Lenders will simply check your income, debts, and affordability check. That is if you just don't have a credit history just yet or you don't borrow money from institutions.

How Deposit Works

If you have a bad credit score for whatever reason, it will be harder for you to get a mortgage without providing some amount for the deposit. It works as a guarantee for the mortgage company. This will show you are committed enough to pay your mortgage diligently.

As an example, even with a good credit score, if a good amount of deposit was provided, it can give you a better interest rate. So if you have a bad credit score, providing a higher amount of deposit can still give you the ability to get rid of paying a higher interest rate with your mortgage.

What is Shared Ownership

Shared Ownership is another option that you have in case you can not afford the mortgage payment 100%. Instead of applying for the full mortgage of the house, you can take advantage of the Shared Ownership.

For example, if you have a low-income earner at a time, you can buy your share in between 25% to 75% of the value of the house. You still have to continuously pay the rent and just buy a bigger share once you have a better income.

Conclusion

Owning a house in the UK is more flexible now. Thanks to the Right to Buy Scheme as well as with Shared Ownership. Both of these ways can help so much for those who don't have a huge income. No worries if you have a bad credit score either. You still have a chance to apply for a mortgage with the Right to Buy Scheme since there many companies who are willing to assist you when it comes to this. Just check your eligibility from them in order for you to know if you can apply for it. That way, your rent money will not just disappear and you can own a home in the future.