Can you get a help to buy with bad credit?
You may be wondering if you can get a help to buy mortgage with a bad credit record.
Indeed, a bad credit may not necessarily stop you from getting a help to buy mortgage, help to buy equity loan or ISA, if you speak to a help to buy mortgage broker with a good overview of the mortgage market you may be able to find a mortgage lender who will lend to you even with a bad credit.
It is important to know that a bad credit will not affect your eligibility for the help to buy scheme.
What does a bad credit entail when considering a help to buy mortgage:
- IVA (Individual voluntary agreement)
- County court judgement
- Defaults on any credit agreements
- home repossessions
What is the help to buy scheme?
The help to buy scheme is a government scheme for first-time buyers and homeowners which enables them to get on the property ladder quicker.
Tip: You can use both the help to buy equity loan and the help to buy ISA.
There are two types of help to buy scheme:
- The help to buy ISA
- The help to buy equity loan
The help to buy ISA
The help to buy ISA is an ISA product whereby the government will give you a maximum bonus of £3,000 if you saved the maximum amount of £12,000.
You essentially receive £50 for every £200 you save.
You will need to have saved a minimum of £1600 to claim the minimum government bonus of £400.
You can deposit up to £1200 in your first month.
The government bonus cannot be used towards the mortgage deposit or associated costs such as exchange of contracts, solicitors fee etc. The government bonus from the help to buy ISA will be received after the completion of your home purchase.
Can you get a help to buy ISA with bad credit?
The help to buy ISA is essentially a savings product and your credit file will not be checked.
To be eligible for a help to buy ISA you simply need to:
- You should not have any other ISA in the same year but you can switch from a different ISA to the help to buy ISA.
- Be over16 years
- Be a UK resident
- Be a first-time buyer
The help to buy equity loan
The help to buy equity loan is a government loan given to eligible first-time buyers to increase their affordability for a mortgage.
The help to buy equity loan will provide a 5-year interest-free loan for 20 to 40% of the property price with a maximum cap of £600,000.
After the 5th year, you will begin making repayments on the help to buy equity loan at a rate of 1.75%. This rate will then climb at a rate of 1% per year plus inflation.
Can you get a help to buy equity loan with bad credit?
Yes, you can get a help to buy equity loan with bad credit but you may not get a mortgage to accompany your help to buy equity loan if you have bad credit.
Your mortgage lender will perform a credit check and will scrutinize your finances to ensure you can afford a mortgage.
This means a CCJ, a bankruptcy or an IVA on your credit file may affect your ability to get a mortgage although it is still possible. You will have to speak with a bad credit mortgage broker experienced with helping people with bad credits.
To be eligible for a help to buy equity loan you will have to:
- Be aged 16 years or over
- Be a UK resident
- Be a first-time buyer or a homeowner looking to move
- must not own any other property