Are Government Mortgage Schemes Open for People With Bad Credit?

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Government schemes such as Help to Buy and Shared Ownership are there to make it easier to get onto the property ladder.

However, thousands of people assume they can’t join one of these initiatives or take advantage of mortgage support schemes because they have bad credit or a low credit score.

Today, our mortgage brokers explains some of the requirements of these programmes and why they can offer an excellent opportunity to streamline your mortgage application, even if you’ve been turned down before because of bad credit history.

Can I Use Help to Buy For a Bad Credit Mortgage?

Potentially, yes. A lender will look at when your credit problems happened, how serious they were, the deposit you have to offer, and your income, all wrapped up in the affordability assessment.

If you have had defaults or late payments in the last 12 months, it might make it harder to find a suitable lender who will accept your Help to Buy mortgage application.

Credit issues from several years ago are less likely to cause an issue (depending on the nature of the problem), and anything over six years ago won’t show up in your credit report online payday loan.

Is Shared Ownership Open for Bad Credit Mortgages?

Shared Ownership is one of the easiest mortgage support schemes for applicants with bad credit mortgage since you get to choose what proportion of the property you buy.

For example, some lenders offer mortgages up to 75% of the property share, and others will lend against up to 50% of the value.

This percentage typically depends on how much you can afford to borrow, depending on the lender’s affordability criteria, your annual earnings, and existing debts.

Therefore, it’s highly advisable to work with an experienced broker to ensure you apply to suitable lenders who offer the Shared Ownership terms you need.

Which Help to Buy Programme is Best Suited to Bad Credit Mortgages?

Help to Buy equity loans and Shared Ownership are parts of the government Help to Buy scheme, and neither prohibit applicants from using the initiative because of bad credit.

However, it’s important to remember that the scheme might offer support, but you still need to find a lender who will accept the application.

  • Help to Buy equity loans mean you can contribute a 5% deposit and borrow an equity loan of 20% (or 40% in London). The loan is interest-free for five years, and you can then get a better mortgage deal with a total 25% deposit.
  • Shared Ownership enables you to buy a proportion of a home if you can’t afford 100% of the value. Shared Ownership mortgages start from 25% and usually go up to 75% of the property, and you pay rent for the balance to the local housing association.

Can I Use Right to Buy as a Bad Credit Mortgage Applicant?

Right to Buy was introduced in 1980, allowing tenants in council housing to purchase a property they are already renting at a discounted price, often considerably below market value.

To qualify, you need to:

  • Have been a council tenant for three years
  • Be able to afford the mortgage repayments
  • Meet other lender requirements

The maximum discount is just under £85,000, taken off of the market value, and increasing every year according to the consumer price index.

If you live in a council property or local authority housing and have done so for three years or more, you can apply for the Right to Buy scheme regardless of your credit rating.

Is the Mortgage Guarantee Scheme Open to People With Bad Credit?

Yes, but again it’s more complex to get approval, and a lender will usually offer a higher interest rate depending on the severity of your credit issues.

Options are limited, but it’s certainly not impossible!

Most UK lenders will be more likely to approve your mortgage, with the support of the guarantee scheme, if you have a low credit score, no credit history, or late payment history.

Other problems such as defaults, CCJs, debt management plans, IVAs and missed mortgage payments are tougher to overcome, so a specialist bad credit lender may be the most suitable solution.

Although the age and type of credit problems impact a lender’s decision, the more severe your credit issues, the less likely a lender will offer approval.

However, the positive news is that there are several options, and the mortgage guarantee scheme is just one potential solution.

Since the pandemic, some specialist lenders have brought back 95% LTV mortgages, and where they have flexible bad credit policies, the interest rates may be more attractive.

For more information about any mortgage support schemes discussed here, please get in touch with Revolution Brokers on 0330 304 3040 or via


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