Right to Buy Mortgages with Bad Credit: How to Make It Happen

For council and housing association tenants, the Right to Buy scheme can provide an opportunity to purchase the home they already live in, often at a discounted price. However, for applicants with adverse credit history, questions often arise about whether a Right to Buy mortgage with bad credit is achievable.

While bad credit can make any mortgage application more complex, it does not automatically prevent a Right to Buy purchase. Lenders assess these applications based on a combination of factors, including the type of credit issues involved, affordability, and the structure of the Right to Buy transaction itself.

This guide explains how Right to Buy mortgages work, how bad credit is typically assessed by lenders, and what factors may influence an application. It is intended to provide general information only.

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What Is the Right to Buy Scheme?

Right to Buy is a UK government scheme that allows eligible council tenants, and some housing association tenants, to purchase their home at a discount.

Key features of Right to Buy include:

• Eligibility based on tenancy length and property type
• A discount applied to the market value of the property
• The option to use the discount as part of the deposit in some cases

The size of the discount depends on factors such as how long the tenant has lived in the property and whether it is a house or flat. Maximum discount limits apply and vary by location.

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How Does a Right to Buy Mortgage Work?

A Right to Buy mortgage is similar to a standard residential mortgage, but with some additional considerations.

In most cases:

• The property is valued at its full market value
• The Right to Buy discount is applied to the purchase price
• The mortgage is calculated based on the discounted price

Some lenders allow the discount to be treated as a deposit, meaning the borrower may not need to contribute cash upfront. However, this depends on lender criteria and individual circumstances.

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What Is Considered Bad Credit?

Bad credit is a broad term that refers to negative information on a credit report. This may include:

• Missed or late payments
• Defaults
• County Court Judgments (CCJs)
• Debt management plans
• Individual Voluntary Arrangements (IVAs)
• Bankruptcy (historic)

Not all credit issues are viewed equally. Lenders usually assess the severity, frequency, and recency of adverse credit rather than applying a single definition of bad credit.

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Can You Get a Right to Buy Mortgage with Bad Credit?

In general terms, it may be possible to get a Right to Buy mortgage with bad credit, but this depends on several factors.

Lenders typically consider:

• The type of adverse credit on the file
• How recent the credit issues were
• Whether accounts are now settled or up to date
• Overall affordability and income stability
• The level of equity created by the Right to Buy discount

Some lenders are more flexible than others when it comes to adverse credit, particularly where the discount provides a lower loan-to-value.

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Why the Right to Buy Discount Can Help

One aspect that can work in favour of some applicants is the Right to Buy discount itself. Because the discount reduces the effective purchase price, it can create a lower loan-to-value ratio.

For example:

• Property market value: £200,000
• Right to Buy discount: £60,000
• Purchase price: £140,000

In this scenario, the mortgage is assessed against the discounted price, but the lender may still consider the underlying market value when assessing risk. Lower LTVs are generally viewed more favourably, although they do not override credit issues entirely.

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How Lenders Assess Credit History

Mortgage lenders do not rely on credit scores alone. They review the full credit report and look for patterns over time.

Factors often reviewed include:

• Whether missed payments were isolated or repeated
• Whether adverse credit was recent or historic
• Whether issues were linked to a specific period of difficulty
• How the applicant has managed credit since

For example, a single missed payment several years ago may be treated very differently from multiple recent defaults.

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The Importance of Recency

Recency is often one of the most important elements of adverse credit assessment.

• Historic issues (for example, more than three or four years old) may carry less weight
• Recent issues (within the last 12 months) may significantly reduce lender options

Some lenders apply specific minimum timeframes since the last adverse credit event, while others assess applications on a case-by-case basis.

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Affordability and Income Stability

Even where credit history is less than perfect, lenders must still be satisfied that the mortgage is affordable.

Affordability assessments typically include:

• Verified income
• Regular household outgoings
• Existing credit commitments
• Stress testing against higher interest rates

Stable employment, consistent income, and manageable expenditure can help demonstrate that past credit issues are not ongoing.

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Deposit and Fees Considerations

While the Right to Buy discount can sometimes act as a deposit, there may still be other costs involved, including:

• Legal fees
• Valuation fees
• Application or product fees

Some lenders may require a cash contribution depending on credit profile or product criteria, even where a large discount is present.

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Specialist vs Mainstream Lenders

Not all lenders offer Right to Buy mortgages, and fewer still are comfortable with adverse credit.

• Mainstream lenders often apply stricter credit criteria
• Specialist lenders may consider a wider range of credit circumstances

Specialist products may involve higher interest rates or fees to reflect increased risk, and availability can change over time.

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Joint Applications and Family Support

Some Right to Buy applications are made jointly, for example with a partner or family member. In these cases, lenders assess the credit profile and income of all applicants.

In certain circumstances, family members may support affordability without being named on the property, depending on lender policy and mortgage structure.

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Restrictions and Considerations After Purchase

Right to Buy purchases come with certain conditions, particularly in the early years after completion.

These can include:

• Repayment of some or all of the discount if the property is sold within a set period
• Restrictions on letting the property
• Requirements to offer the property back to the council if selling

Mortgage lenders are aware of these restrictions and factor them into their lending decisions.

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Common Misconceptions

“Bad Credit Means Right to Buy Is Impossible”

This is not always the case. Some applicants with adverse credit have successfully completed Right to Buy purchases.

“The Discount Guarantees Approval”

While the discount can help with loan-to-value, lenders still apply full affordability and credit assessments.

“All Lenders Treat Bad Credit the Same”

Lender criteria vary widely, and policies can change.

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Preparing for a Right to Buy Mortgage

People considering a Right to Buy mortgage with bad credit often prepare by:

• Checking their credit report for accuracy
• Understanding the size of their Right to Buy discount
• Reviewing affordability and existing commitments
• Allowing time since recent credit issues where possible

Preparation can help set realistic expectations and avoid delays.

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Summary

A Right to Buy mortgage with bad credit can be more complex than a standard mortgage application, but it is not automatically ruled out. Lenders assess the type, timing, and severity of credit issues alongside affordability, income stability, and the equity created by the Right to Buy discount.

Understanding how lenders approach these applications and what factors are considered can help applicants prepare more effectively when exploring their options.

This article provides general information only. For personalised guidance, regulated mortgage advice is required.