Can I get shared ownership mortgages with bad credit?

Can I get shared ownership mortgages with bad credit?

Owning a home is a dream for many. However, securing a mortgage with a blemished credit history can feel like an uphill battle. If you find yourself in this situation, a shared ownership mortgage might be a viable solution. But the question still stands: can you get a shared ownership mortgage with bad credit?

Understanding credit and mortgages

First, let’s understand what we mean by ‘bad credit’. A credit score is a numerical value that lenders use to evaluate an individual’s creditworthiness. This score is influenced by several factors, including the amount of debt you have, your payment history, and the length of your credit history. Bad credit generally refers to a low credit score, which suggests to lenders that there’s a higher risk associated with lending to you.

Traditionally, mortgage lenders prefer applicants with good to excellent credit scores because it indicates a lower risk. If you have bad credit, it can limit your mortgage options and result in higher interest rates. However, it doesn’t necessarily mean homeownership is out of reach.

What is a shared ownership mortgage?

A shared ownership mortgage is a unique scheme designed to help people who can’t afford the full mortgage on a home. With shared ownership, you buy a share of a property (usually between 25% and 75%) and pay rent on the rest. You can then increase your share over time, a process known as ‘staircasing’, until you own the property outright.

This arrangement makes homeownership more affordable and accessible, even for those with less than perfect credit.

Can I get a shared ownership mortgage with bad credit?

The simple answer is yes, but it’s not without hurdles. The reality is that it can be more challenging to secure a shared ownership mortgage if you have bad credit, but it’s not impossible.

Lenders will look at more than just your credit score when considering your mortgage application. They will also take into account your current income, job stability, and debt-to-income ratio. In some cases, lenders might be more willing to approve a shared ownership mortgage if these other factors are in good standing, despite your poor credit history.

However, you should be aware that having bad credit might mean you face higher interest rates compared to those with better credit scores. It’s important to evaluate whether the mortgage payments, plus the rent on the share of the property you don’t own, are affordable for you.

Improving your chances

If you have bad credit and are considering a shared ownership mortgage, there are steps you can take to improve your chances of approval:

Work on your credit score: Pay off outstanding debts, make all future bill payments on time, and try to use no more than 30% of your available credit. These actions can help boost your credit score over time.

Save for a larger deposit: The more you can put down upfront, the less risk you pose to a lender.
Stable Income: Showing you have a stable income can reassure lenders that you’ll be able to keep up with repayments.

Reduce your debt-to-income ratio: Paying down existing debts will improve your debt-to-income ratio, making you a more attractive prospect to lenders.

In conclusion, while bad credit can make the path to homeownership more challenging, it’s not a dead end. Shared ownership mortgages could provide an opportunity to make your dream of owning a home a reality. As with any financial commitment, it’s important to do your research and seek expert advice before making a decision.

Related articles:

How much do I need to earn to get a mortgage?

Can you get a mortgage with poor credit?

Mortgages for Limited Company Directors: Navigating the Path to Homeownership

Get a free initial consultation:

Contact now



Mortgage Repayment Calculator

Monthly Repayment: £0.00