Case study: How I helped a client with adverse credit, on benefit income, buy a home

However, they had a history of adverse credit and were relying on some element of benefit income. The client also had no personal deposit, and therefore was looking to use 100 per cent of the discount as the deposit (see box below).

As many advisers will know, the combination of adverse credit, benefit income and trying to find a lender that would support a Right to Buy application presents a number of issues.

For example, most high-street lenders would not consider an applicant with adverse credit for a mortgage with Right to Buy. 

The key to finding an appropriate solution to any case is to gather as much information as possible on the client in question.

In regards to benefit income, some high-street lenders will lend to an individual if they have a good credit standing, however in this case the individual had adverse credit as well. This narrows the options available and makes finding a suitable solution harder. 

The key to finding an appropriate solution to any case is to gather as much information as possible on the client in question.

It is vital that you know your customer inside and out in order to be able to build a complete picture of them and provide lenders with a holistic view of their circumstances. 

As a result, we reviewed the individual’s earnings, their age, and the term we could base the mortgage payments over. We also reviewed the circumstances as to the client’s adverse credit to understand what had happened and why.

Life events can often affect credit through no fault of the client, and in this instance there had been a breakdown of a relationship and the applicant was left with a level of debt they could not manage on their own.

Some lenders are open to conversations about an applicant if it is an isolated life event that affected their credit rather than poor credit management

Importantly, some lenders are open to conversations about an applicant if it is an isolated life event that affected their credit rather than poor credit management. 

Using the picture we had built up of the client, we secured them a mortgage with a lender who would consider their individual circumstances.

The lender offered a two-year fixed-rate mortgage, which was suitable and affordable and allowed them to purchase the home they had been living in as a tenant. 

It may be assumed that if you go to a lender who is able to consider a scenario like this, you might see larger monthly repayments.

While the interest rate was higher than other high-street lenders could have provided, the mortgage repayments were lower than their previous rent payments, so the solution worked perfectly for them. 

For other brokers working with similar cases, there are three things that are vital.

First, your own experience as an adviser will help you understand which lenders are more likely to look at a case than others, helping you narrow down your search. 

Having access to really good technology and understanding how to use it is important too. Whether that be understanding sourcing tools and customer relationship management systems or how you can drill down into their circumstances and find lenders that will look at that particular case. 

Lastly, drawing on support from your club's help desk in order to address issues such as compliance, for example, makes a real difference.

TMA builds a rapport with each of their brokers and that makes it much easier to discuss difficult client circumstances and help find a solution that works.

Lucy Billingham is a mortgage, insurance and equity release specialist and head of compliance at Orchard Financial Advisers