How to Secure a Bad Credit Buy to Let Mortgage
Buy to let mortgages or remortgages are doubtless more challenging to come by if you have an adverse credit history to factor in.
However, there are specialist bad credit lenders out there, and you might be surprised at how many mortgage lenders’ criteria you fit, depending on the anticipated rental revenue from your investment!
For more assistance with bad credit buy to let mortgages, give the Revolution Brokers team a ring on 0330 304 3040, or drop us a message at [email protected].
Can I Get a Buy to Let Mortgage UK Bad Credit Rating?
Quite possibly, yes. There are hundreds of buy to let lenders, from high street banks to specialist providers. Most lenders will decide based on what sort of credit issues you have had and when they occurred.
Working with an independent broker to avoid making rejected applications and racking up more hard searches on your credit file is vital.
Can I Mortgage or Remortgage Buy to Let With Bad Credit Due to a Low Credit Score?
Low credit scores and a bad credit score are two very different things. The challenge is to ensure that you apply to a lender whose eligibility criteria you can meet. Many high street banks rely heavily on generic credit scores, whereas niche lenders are often more interested in your general financial conduct.
A low score usually means that you haven't ever taken out credit borrowing or haven't registered on the electoral roll.
Bad credit means that you haven't kept up with your debt repayments at some point. If you're not sure of your credit rating, it's very wise to access a copy of your credit file and ensure it is all up to date and accurate.
Credit reports show:
- All of your accounts with credit borrowing, from mortgages to mobile phone contracts.
- Any recorded court action taken against you, such as a CCJ.
- Searches run on your credit file.
What are the Buy to Let Mortgage Options for Different Types of Credit Issues?
Your chances of approval will depend on what sort of credit problems you have experienced. Some lenders will disregard minor issues, whereas others will automatically reject any applicant with a credit score below a threshold, so it's crucial to evaluate your situation before making any applications.
- Late payments are not uncommon. While some lenders will decline any applicant with a missed payment, most providers will consider offering competitive interest rates. One or two isolated late payments are a much less serious issue than having multiple late payments in the last few months.
- Mortgage arrears arise when you owe more than this month's repayments. In most cases, arrears are treated like a missed payment, although serious arrears are more complicated. Many landlords fall into arrears when a rental property is vacant, so if you can appoint a broker to explain the cause, you're more likely to be successful.
- Defaults mean that you have missed between three and six payments and issued a formal letter of demand. You can still get a buy to let mortgage in this scenario, depending on how many defaults you have had, when, and for what value.
- CCJs are more serious again, and as with defaults, the lender will consider when, why and how the CCJ occurred before deciding whether or not to lend. Having a CCJ several years ago due to expire from your credit report soon is a much easier scenario than having one registered in the last few months.
- Debt Management Plans are a way for people to get their debts back under control. Some lenders will refuse any landlord with a DMP history since it can represent poor financial management. Still, some mortgage providers will consider applicants with a DMP, depending on how many, when they occurred and if all the DMP repayments have been made on time.
- IVAs (individual voluntary arrangements) are another debt management tool that can impact your eligibility for a buy to let mortgage. There are bad credit lenders who can help, but you might require a higher deposit and will likely be quoted more expensive interest rates.
- Bankruptcy means that you must work with an independent broker to have a BTL mortgage approval chance. If this has been discharged, and your broker can make your case and negotiate with the lender, it may be possible to find a buy to let mortgage.
- Repossessions can make it very difficult to find any mortgage since, in the past, you have failed to make repayments to the extent that the lender has to sell the property to recoup their losses. Even in this situation, you might be successful if the repossession was some time ago, and you can create a compelling application.
Finding a Buy to Let Mortgage Bad Credit Late Payments
Late payments are not uncommon.
While some lenders will decline any applicant with a missed payment, most providers will consider offering competitive interest rates.
One or two isolated late payments are a much less serious issue than having multiple late payments in the last few months.
Can I Get a Buy to Let Bad Credit Mortgage With Arrears History?
Mortgage arrears arise when you owe more than this month's repayments.
In most cases, arrears are treated like a missed payment, although serious arrears are more complicated.
Many landlords fall into arrears when a rental property is vacant, so if you can appoint a broker to explain the cause, you're more likely to be successful.
Bad Credit Buy to Let Mortgages With Defaults
Defaults mean that you have missed between three and six payments and issued a formal letter of demand.
In this scenario, you can still get a BTL mortgage, depending on how many defaults you have had, when, and for what value.
Getting a Buy to Let Mortgage With Bad Credit CCJs
CCJs are more serious again. As with defaults, the lender will consider when, why and how the CCJ occurred before deciding whether to lend.
Having a CCJ several years ago due to expire from your credit report soon is a much easier scenario than having one registered in the last few months.
Buy to Let Mortgage Bad Credit DMPs
Debt Management Plans are a way for people to get their debts back under control.
Some lenders will refuse any landlord with a DMP history since it can represent poor financial management.
Still, some mortgage providers will consider applicants with a DMP. That depends on how many, when they occurred and if all the DMP repayments have been made on time.
Buy to Let Bad Credit Mortgages With an IVA
IVAs (individual voluntary arrangements) are another debt management tool that can impact your eligibility for a buy to let mortgage.
Bad credit lenders can help, but you might require a higher deposit and will likely be quoted more expensive interest rates.
Getting a Bad Credit Buy to Let Mortgage After Bankruptcy
Bankruptcy means that you must work with an independent broker to have a BTL mortgage approval chance.
If this has been discharged, and your broker can make your case and negotiate with the lender, it may be possible to find a buy to let mortgage.
Buy to Let Mortgage UK Bad Credit Repossessions
Repossessions can make it very difficult to find any mortgage since, in the past, you have failed to make repayments to the extent that the lender has to sell the property to recoup their losses.
Even in this situation, you might be successful if the repossession was some time ago, and you can create a compelling application.
Criteria for Getting a Buy to Let Mortgage With Bad Credit
Each lender will rely on their policies and criteria to decide whether they can consider a buy to let mortgage applicant with a bad credit history.
- Affordability on buy to let mortgages looks at how much rent the investment will generate. Most lenders need this to be 125% to 145% of the monthly mortgage interest, depending on which tax bracket you are in.
- Your deposit will typically need to be from 15% as a minimum - but is likely to be higher in a bad credit scenario.
- Lenders may also assess your age, with some having caps, usually around 85, on the upper limit of applicants they will accept.
Professional Help with Bad Credit Buy to Let Mortgages UK
Suppose you want to mortgage a buy to let with healthy rental returns and can demonstrate your commitment to keeping the mortgage in check. In that case, it is usually possible to find a suitable provider, depending on the credit issues in question.
For an independent assessment and tailored advice to help you find the right mortgage lender for you, give the mortgage brokers team a call on 0330 304 3040 or drop us an email at [email protected].
