How Just Mortgage Brokers Can Help You
The government’s statutory Right to Buy scheme, designed to allow council tenants in England to buy the home they rent at a discounted price, was introduced in 1980, since when around two million council properties in England have been purchased.
A number of changes introduced in 2015 made the Right to Buy scheme a more attractive proposition to many people, even if you have bad credit: it is now available to those who have been council tenants for three years, rather than the previous five, and maximum discounts are now £77,900 (or £103,900 in London) increasing each year in April in line with the consumer price index (CPI).
New Right to Buy Criteria 2016/17
A major change to the scheme was to extend Right to Buy to include assured tenants of housing associations. The scheme operates on a voluntary basis and was piloted by five housing associations in 2016.
In the Autumn Statement 2016 a substantial one year regional pilot of the Right to Buy scheme for housing association tenants was announced, to be run during 2017–2018. The expectation is that the scheme will allow more than 3,000 tenants to purchase their homes.
Right to Buy Mortgages
A number of lenders now offer Right to Buy mortgages, providing financing for eligible tenants – whether council or housing association – to buy their homes. However, if you have suffered bad credit problems in the past it may affect whether you are able to get a mortgage. Here are a few things to consider if you are wondering whether you can still buy your council house with a history of bad credit.
How can I tell if I have bad credit?
Your ability to get a mortgage is most likely to be affected if you have defaulted on a debt, had a County Court Judgment (CCJ) registered against you, or been declared bankrupt. However, less serious credit problems – such as missed or late payments – can also have a bearing, especially if there were quite a few of them. Remember that “credit” does not just include obvious things like credit cards, loans and overdrafts; it can also cover things that many people do not normally think of as credit arrangements, such as utility bills, gym membership arrangements, and broadband or mobile phone contracts. Payment arrears on any formal credit arrangement will be recorded on your credit record.
The elements that can determine your credit score are your payment history; the amount of debt you currently have; how long your credit history record is, the types of credit you have had previously, and the number of credit searches that have been made against your name.
There are a number of credit reference agencies in the UK that gather information on how people manage their debts and payments. Mortgage lenders and other credit companies check with these agencies to obtain the information they require to assess whether an applicant is creditworthy. You can also apply directly to each of the credit reference agencies to obtain access to your credit records and see for yourself whether they contain any adverse information. The three main credit reference agencies are Experian, Equifax, and Callcredit, who offer credit report services via Noddle.
What should I do if my credit record shows bad credit?
If your credit record shows missed payments, defaults or any other signs of bad credit, the first thing to do is ensure that those details are accurate. Credit companies can and do make mistakes, and if any of the information on your credit file is inaccurate or in dispute then you have the right to have it corrected. If possible, you should do this before applying for your mortgage.
If payments were missed due to something out of your control such as, for example, your employer going bust, then get in touch with the credit reference agency and tell them. If they are prepared to add a note to the file explaining what happened, this might be enough to swing a credit decision in your favour.
It can also be helpful to take action to repair your credit rating. Simple steps you can take include making sure you are on the electoral register, closing off old credit facilities – such as unused credit cards – and avoiding making multiple credit applications close together. For more information, take a look at our tips on how to repair your credit rating.
Am I likely to be accepted for a Right to Buy mortgage?
Mortgage lenders weigh up applications using a scoring system to assess the risk of you not paying them back, either on time or at all, based on a wide variety of criteria. In terms of your credit history this includes considering both the severity of your past credit problems and how long ago they occurred. Defaults, CCJs and bankruptcies all stay on your record for six years, but generally have less of an impact as time passes – assuming you do not have any more added to your record.
The good news is that there are lenders out there who specialise in providing mortgage lending to applicants with a less-than-perfect credit history. Even if you have been turned down by high street banks or building societies, it may still be possible to secure a bad credit Right to Buy mortgage deal. By dealing with a Right to Buy mortgage broker with experience of securing finance for people with bad credit, you can improve your chances of being able to find a lender offering a deal that meets your individual circumstances.
We specialise in helping homebuyers who have had credit problems – contact us today to discuss how we can help you to buy your own home.