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Bad Credit Buy to Let Mortgages
Buying a property to let can be a good way to boost your income and invest for the future. We’re often asked how bad credit affects your chances of getting a buy to let mortgage. As always, the best advice is to explore the options with a mortgage broker.
Can I get a Buy To Let mortgage with bad credit?
Poor credit is actually less of an issue for a Buy to Let mortgage than a residential loan. That’s because you will be supported in paying the mortgage by your tenants, so there is less pressure on you as an individual to fund the repayments.
While some mainstream lenders might be less keen to accept you with bad credit, there are many specialist mortgage providers that will accept certain items on your credit report.
What credit issues could affect my mortgage?
Mortgage lenders are often more interested in the details behind your credit score than the score itself. Typical issues that can cause a poor credit rating include:
- Late payments on loans or credit cards
- Falling into mortgage arrears
- Defaulting on a loan
- County Court Judgements (CCJs)
- Debt Management Plans
- Individual Voluntary Arrangements (IVA)
- Bankruptcy
- Being subject to repossessions in the past
Any notes on your credit file disappear after six years. Generally, if you have repaid the money owed and the issue was a few years ago, you should find lenders that will offer you a loan.
Do lenders specialise in BTL Mortgages for people with bad credit?
Each lender sets their own criteria about the customers they are willing to accept. Even high street lenders will accept low level credit issues.
It’s important to get professional mortgage advice if you have credit problems, because it can harm your credit score further if you apply for several mortgages having been declined.
A mortgage adviser will recommend specialist lenders to suit you. You may find that if your credit issues are fairly serious, you need to contribute a bigger deposit or pay higher interest rates.
How much deposit will I need for a BTL mortgage if I have bad credit?
Most Buy to Let mortgage companies want at least 25% of the property value as a deposit. If you have a poor credit score you might need up to 40% as a deposit or even more.
Putting down more cash on a Buy to Let mortgage will reduce the monthly repayments, meaning you make more profit on the rent.
What other factors will affect me getting a buy to let mortgage in the UK with bad credit?
The main consideration for a Buy to Let mortgage is the level of rent you will be able to generate. You need to have done some research into typical monthly rent in your area. Many lenders will require the rental income to cover 125% of the mortgage payment.
Your age is also relevant. Most Buy to Let mortgage lenders will not accept people over 70 years old – although sometimes this extends to 75.
How does affordability affect a BTL mortgage with poor credit?
While the main focus for lenders is rent you will receive from your tenants, they will also be interested in your personal situation. Many Buy to Let lenders need evidence that you earn at least £25,000 per year.
There are likely to be certain times when your property is vacant, so lenders seek reassurance that you can cover the mortgage payments when there’s no tenant in place.
If you have bad credit, the lender may also require detailed information about your monthly income and outgoings.
Should I improve my credit score before becoming a landlord?
Some people work at improving their credit scores before taking on a mortgage. You can do this by paying all bills on time and staying well within all credit limits.
But if you can get a Buy to Let mortgage, you may be able to use the rental income to improve your credit score over time instead.
How can a Mortgage Broker help?
Speak to a mortgage broker before looking at Buy to Let properties. At Mortgages by McAteer we can offer you advice on typical rents in your local area, and work with you both on credit checks and exploring all your options across a large number of lenders.
We have lots of experience in helping people with adverse credit history. When you’re ready to apply for a Buy to Let deal, we will help you with all the required paperwork for the mortgage application.
While Buy to Let mortgages are not authorised and regulated by the Financial Conduct Authority, we work with highly reputable lenders to achieve your property rental goals.
Mortgages by Mcateer Ltd is an appointed representative of The Openwork Partnership, a trading style of Openwork Limited which is authorised and regulated by the Financial Conduct Authority.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS. SOME BUY TO LET MORTGAGES ARE NOT REGULATED BY THE FINANCIAL CONDUCT AUTHORITY.
SOME BRIDGING FINANCE, BUY TO LET and LET TO BUY MORTGAGES ARE NOT REGULATED BY THE FINANCIAL CONDUCT AUTHORITY.
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