Buying your council home through the Right to Buy scheme can be an exciting opportunity, allowing you to take a significant step onto the property ladder. But what happens if you have a default on your credit record? Is it still possible to secure a Right to Buy mortgage with a default? In this article, we explore your options clearly.
First things first: let’s clarify what Right to Buy is. Introduced under Margaret Thatcher’s government in the 1980s, the Right to Buy scheme allows council tenants in England (and previously Scotland and Wales, though schemes there have changed or ended) to buy the home they’ve been renting, typically at a significant discount. This discount is based on how long you’ve lived there, making home ownership achievable for many tenants who might otherwise struggle to enter the housing market.
Talk to a qualified broker today.
Contact us nowA default occurs when you’ve missed payments on a credit agreement, such as a loan, credit card, or utility bill, and haven’t resolved the situation within a set period (usually between three and six months). The default is recorded on your credit file, usually staying there for six years, even after you’ve settled the debt.
Having a default on your credit file can negatively affect your credit score. Mortgage lenders view defaults as evidence of previous financial difficulties, potentially making it harder for you to get a loan or secure the best mortgage rates.
The short answer is yes—it’s possible—but it depends on several factors. Each lender has their own policies and ways of evaluating risk, but most mainstream high-street banks will look carefully at any defaults on your credit history. However, having a default doesn’t automatically disqualify you.
Some specialist mortgage providers specifically cater to applicants with less-than-perfect credit scores. These lenders understand that financial difficulties can arise for many reasons, including illness, job loss, or unexpected expenses. They look at your whole financial situation, not just your credit history.
Several factors influence your chances of securing a Right to Buy mortgage with a default:
How old is the default? The older the default, the less significant it becomes to lenders. If your default is five years old and you’ve maintained good credit behaviour since then, your chances improve significantly.
Amount of the default
Smaller defaults (less than £500, for example) are usually considered less problematic than larger defaults. The lender will also check if you’ve cleared the debt or if it’s still outstanding.
Number of defaults
Multiple defaults may suggest ongoing financial mismanagement. In contrast, a single isolated default followed by responsible financial behaviour carries less weight.
Your current financial circumstances If your income is stable and you have sufficient disposable income each month, lenders may be more inclined to offer a mortgage despite past credit issues.
Deposit or equity level
Although the Right to Buy scheme usually offers a substantial discount (effectively acting like a deposit), lenders may feel more comfortable if you can show some additional savings or equity.
If you have a default and you’re considering applying for a Right to Buy mortgage, there are several things you can do to improve your chances:
Before you approach lenders, get a copy of your credit report from providers such as Experian, Equifax, or TransUnion. Ensure everything listed is accurate and up-to-date, and correct any mistakes immediately.
Pay off outstanding debts or defaults if you can. If the default has been settled, lenders will see this positively, indicating you’ve addressed past financial issues.
Consider using a mortgage broker who specialises in bad credit mortgages. They’ll have experience placing mortgages with appropriate lenders and can advise you on the best route forward.
Even small steps like registering on the electoral roll, reducing your debt, and avoiding multiple credit applications can help improve your score before applying for a mortgage.
Yes, having a default doesn’t automatically disqualify you from applying for the Right to Buy scheme. The scheme itself doesn’t assess your credit history; however, securing a mortgage to finance the purchase may be more challenging with a default on your record.
A default can impact your mortgage application, as lenders view it as a sign of previous financial difficulties. This may lead to fewer available mortgage options or higher interest rates. Nonetheless, some lenders specialise in offering mortgages to individuals with adverse credit histories.
No, you have access to the same mortgage products available on the market as everyone else. It’s advisable to shop around and seek impartial advice to find the mortgage product that best suits your needs.
Some lenders may offer mortgages covering 100% of the discounted purchase price under the Right to Buy scheme, even to applicants with defaults. However, these deals can be limited, and eligibility will depend on factors like the age and amount of the default, your current financial situation, and the lender’s specific criteria.
To enhance your prospects:
Applying jointly with a partner who has a strong credit history can positively influence your mortgage application. Lenders will assess the overall financial stability of both applicants, which may offset the impact of your default.
Yes, certain lenders focus on providing mortgages to those with adverse credit histories, including defaults. These specialist lenders often have more flexible criteria than mainstream banks. Working with a mortgage broker can help identify these lenders and navigate the application process effectively.
Yes, both the amount and the recency of the default are significant factors. Smaller and older defaults are generally viewed more leniently by lenders, especially if you’ve demonstrated improved financial management since the default occurred.
Yes, you can add a ‘notice of correction’ to your credit file to provide context for any defaults. This allows you to explain any mitigating circumstances, such as illness or redundancy, which led to financial difficulties. While not all lenders may consider this note, it can provide additional insight into your financial history.
Waiting until the default is expunged (typically after six years) may improve your credit score and mortgage prospects. However, if you’re keen to proceed, especially to take advantage of the Right to Buy scheme, exploring current options with the assistance of a mortgage broker could be beneficial.
If traditional mortgages are unattainable, consider:
Each option has its own requirements and implications, so thorough research and professional advice are essential.
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