If you’ve been renting a home from a local council or housing association in Sunderland, you may be eligible to purchase the property through the government’s Right to Buy Scheme.

Under this scheme, you can benefit from a discounted purchase price, which can often be used as a form of deposit. To qualify for Right to Buy in Sunderland, you typically need to have been a public sector tenant for at least three years. The longer you’ve rented, the greater the discount you may receive.

Each applicant’s circumstances are unique, and while the process may be straightforward for some, it can be more challenging for others. If you have bad credit, it can significantly impact your ability to secure a mortgage.

Fortunately, it is possible to obtain a Right to Buy mortgage with bad credit. Personal circumstances and the discretion of mortgage lenders will play a role.

Working with a mortgage broker in Sunderland can be beneficial, as they can help explore your options and find lenders who may be willing to provide a mortgage under these circumstances.

How do I know if I have bad credit? 

The definition of bad credit can vary depending on the mortgage lender you are dealing with. Some lenders may consider missed credit card payments, phone contract payments, or loan instalments as indicators of bad credit, while others may be more lenient and look past them.

If you have experienced more severe financial challenges such as bankruptcy, County Court Judgments (CCJs), or a history of defaults, you will likely be classified as having bad credit.

These circumstances can significantly impact your credit score, which in turn affects your eligibility for a Right to Buy Mortgage in Sunderland.

Having a low credit score can make it more challenging to secure a mortgage. While we work with a diverse panel of lenders, including specialists in bad credit mortgages, it’s important to note that being classified as a higher risk borrower can still have implications.

From the perspective of a mortgage lender, a lower credit score may raise concerns about your ability to make regular mortgage payments, potentially leading to repossession and financial loss for the lender.

As a result, applicants with bad credit often face higher costs and may have limited options available to them.

What types of bad credit will have an impact on my Right to Buy mortgage?

Having bad credit can impact all types of mortgages, including first time buyer mortgages in Sunderland, remortgages in Sunderland, and others. It’s important to note that different factors associated with bad credit can affect your eligibility for a mortgage.

Bankruptcy can pose a significant challenge. Typically, if at least 3-6 years have passed since you were discharged from bankruptcy, you have a better chance of finding a specialist mortgage lender who may consider your application.

Debt Management Plans (DMPs) and Individual Voluntary Arrangements (IVAs) also have implications. These circumstances are more restrictive, and if at least 3 years have passed since entering a DMP or IVA, your chances of success improve. If it has been less than 3 years, your options may be limited.

Having experienced repossession can also make obtaining a Right to Buy mortgage more difficult. While some mortgage lenders may consider your application if sufficient time has passed since the repossession, we find that the majority of lenders are likely to reject such applications.

Other common instances of bad credit include County Court Judgements (CCJs), defaults, arrears, missed or late payments, and a low credit score. Among these, a low credit score is considered the least severe.

Late or missed payments can vary in their impact, and mortgage lenders may have varying perspectives on the matter. Arrears, defaults, and CCJs are more serious, and mortgage lenders typically want to see that at least three years have passed since these events occurred.

In cases involving arrears, defaults, and CCJs, specialist mortgage lenders will review the specific circumstances surrounding the bad credit. Depending on factors such as satisfying outstanding payments and being several years removed from the situation, there may be potential options available to you.

How does having bad credit affect a Right to Buy mortgage?

The likelihood of securing a Right to Buy mortgage with bad credit depends on how far removed you are from your credit issues. Taking steps to improve your financial situation can positively influence a mortgage lender’s perception.

Factors such as clearing County Court Judgements (CCJs) and maintaining a clean credit file can enhance your chances. It’s important to note that there are no guarantees, and obtaining a Right to Buy mortgage with bad credit will still present challenges.

Nevertheless, having these positive factors may provide you with more options to explore.

To determine your eligibility for a Right to Buy mortgage with bad credit, it is advisable to consult with a dedicated mortgage broker in Sunderland. Many brokers, including Sunderlandmoneyman, have access to specialist mortgage lenders who cater to complex cases.

While the process may be challenging and may involve higher interest rates, a mortgage broker in Sunderland can help find the most suitable deal for you based on your unique circumstances.

Their expertise in matching borrowers with lenders who specialise in bad credit mortgages can increase your chances of securing a Right to Buy mortgage that fits your needs.

If I have bad credit, do I need to put down a deposit for my Right to Buy mortgage?

When purchasing a local authority home through a Right to Buy mortgage in Sunderland, the discount applied to the property’s market value can often be accepted as a deposit by the mortgage lender. This is because you are already acquiring the property below its market value.

If you are applying for a Right to Buy mortgage with bad credit, your circumstances may differ. Bad credit poses a higher risk to mortgage lenders, which means they may have specific requirements for deposit amounts.

If your discount equates to a smaller deposit and you have bad credit, a mortgage lender may request additional funds from you to increase the deposit percentage. In other cases, if the discount corresponds to a deposit of 10-20%, lenders may be more flexible.

Ultimately, the decision will depend on factors such as your length of residency, personal situation (including bad credit), and the policies of the mortgage lender. In general, providing a higher deposit improves your access to better mortgage deals.

This principle applies to Right to Buy mortgages in Sunderland as well. Regardless of your credit history, a larger deposit can lead to improved mortgage options, potentially reducing your monthly payments or securing lower interest rates.

Date Last Edited: 05/12/2023