Buy to Let Mortgages with Bad Credit
Buy to Let Mortgages for applicants with Bad Credit are now more commonplace in a similar way to residential mortgages. A number of lenders are prepared to look at a client’s past credit issues and make a lending decision which may affect either the rate of interest of the amount of deposit required, or in some cases both.
One of our Buy to Let Specialist Brokers will be able to look through your credit file and quickly establish how we can help and recommend a suitable product or course of action.
Can I get a buy to let mortgage with Bad credit?
In the past, raising a mortgage for a Buy to Let property has been an area which requires potential borrowers to have a clean credit history. However, there are now a number of mortgage lenders willing to offer Buy to Let mortgages to borrowers with various degrees of Adverse Credit. It is important to establish the exact nature of the credit issues such as when the events occurred and amounts involved. Having access to your current credit report will help with this and one of our specialists will then be able to accurately access the information with a view to matching your circumstances with a lender.
How Much Deposit Do I Need for a Buy to Let Mortgage if I have Bad Credit?
Typically, any lender will expect you to have a deposit of between 15% and 25% for a Buy to Let mortgage. The amount of deposit will determine the number of lenders willing to consider your application. The larger deposit you have available, the greater the number of options will be. The presence of Poor or Adverse Credit may influence a Lender’s decision and have an impact on the amount of deposit that they will expect you to provide.
For experienced landlords with a portfolio of properties, some of the specialist lenders in this sector may be prepared to look at the portfolio as a whole and base their lending decisions on the combined value of the assets.
buy to let remortgage with bad credit
If you have an existing rental property you may be looking to remortgage for a variety of reasons;
- At the end of a current mortgage deal where the rate is about to increase. This may be a straightforward ‘like for like’ remortgage to obtain another competitive rate.
- At the end of a current mortgage deal where the rate is about to increase but also looking to increase the borrowing for home improvements or possibly to release funds towards further property purchase.
- You may have a rental property that is unencumbered. A remortgage may be taken in order to raise funds towards further property purchase.
The existence of previous Bad of Adverse Credit may have an impact on the options available. However, depending on the nature of the credit problems, there may still be some lenders willing to consider your situation.
Our Specialist Brokers will review your credit report to establish what options may be available to you.
Bad credit buy to let mortgage rates
When you apply for a Buy to Let mortgage, lenders will carry out the same credit checks as when you are buying of remortgaging your own home. Recent adverse credit or low credit score may harm your chances of accessing the best mortgage deals and rates.
However, there are now a number of lenders who will consider applications for borrowers with credit problems. These specialist lenders generally offer mortgages with a higher interest rate than traditional mainstream lenders. This does give the opportunity to still obtain a mortgage and once your credit profile has become ‘clean’, we would look to renegotiate a deal onto a more competitive rate.
Bad credit buy to let mortgage lenders
Similar to residential mortgages, the lenders dealing with mortgage applications where borrowers have bad credit are very specialist and not generally found on the high street.
If you have had credit issues in the past it is important to approach the appropriate lenders rather than visiting a high street mainstream lender, which may result in refusal and have a further adverse effect on your credit file.
By undertaking a review of your past credit problems together with your current financial position, we will hope to match your circumstances to a specific lender.
What Types of Bad Credit are Acceptable to Lenders?
Lenders will usually run a credit check on you when you apply for a Buy to Let mortgage. Some lenders will apply a scoring system and the lower the score, the tougher it may be to get approval for a mortgage. Other lenders may not physically ‘score’ the application but will make a decision from the information on your credit file.
It is important that the correct lender is chosen to avoid the likelihood of refusal. By discussing your full circumstances with us we can make an appropriate recommendation taking into account the eligibility criteria of a lender.
Some lenders will instantly refuse to approve applicants who have certain credit issues on their credit report, while other lenders may consider your case if the issues are not recent.
There are various categories of adverse credit that will be taken into account and influence a lenders decision.
Mortgage Arrears and Late payments
Lenders will adopt a totally different approach to payments than they do to mortgage arrears.
Missed payments on a secure loan or mortgage will be considered more serious than missed or late payments on an unsecured loan or credit agreement. An occasional late payment on a credit card or telecoms contract may not necessarily have a big impact on a lender’s decision. However, applicants who have missed mortgage payments which potentially puts their home at risk of repossession, will be looked at much more closely. Most lenders will give borrowers until the end of the calendar month before they register a missed payment on your credit file. This does allow some time to rectify the situation in the event of a banking error for instance.
The lenders will consider how many late/missed payments you have on your credit file and how long ago they occurred. One or two isolated late payments several years ago should mean that you will have access to more lenders and lower rates. Multiple late payments within the last year will present a tougher proposition need to be directed towards more specialist lenders. The type of account you have missed a payment for makes probably the biggest difference to whether you will be accepted for a mortgage or not. Missed payments on unsecured accounts are less of an issue than missed payments on secured credit.
Defaults and County Court Judgements (CCJ)
A default notice is served on a borrower when a number of payments have been missed on a credit agreement. This is usually registered when there have been between 3 and 6 missed payments.
If the default is satisfied prior to making an application, this may have a positive effect on a lender decision. Lenders will also consider the number of defaults you have, when they were registered and the amounts involved. Additionally, the circumstances which led to the defaults may be taken into account.
A Count Court Judgement, or CCJ, is a legal decision handed down by the County Court following a hearing at which the court has decided formally that you are responsible for the debt. This is the result of someone taking court action against you and either you do not respond or you are unsuccessful in you defence.
A County Court Judgement of a Default will have a similar negative affect on your credit file and potentially reduce the changes of obtaining credit for up to 6 years.
Debt Management Plans (DMPs)
A Debt Management Plan or DMP, is an arrangement which allows an individual to manage debts easier and pay them off at a more affordable rate by reducing the monthly payments. This does have an adverse effect on the credit file as you are essentially failing to meet the agreed contractual obligation.
It may be that some commitments within the DMP have defaulted. The two are very often linked and because the situation leading to needing a DMP in the first place usually means someone has experienced financial difficulties and probably tried to struggle through for a while before entering a DMP to make things more manageable.
Individual Voluntary Arrangement (IVA)
An IVA is a legally binding agreement with creditors in order to help repay debts at an affordable rate. Viewed as a form of insolvency, an IVA can affect the ability to obtain finance for up to 6 years after it has been cleared. Regular payments are made to an insolvency practitioner who splits the money between creditors.
As a result of a debt problem, an individual can apply for bankruptcy. Alternatively, a single creditor who is owed more than £5000, may apply to make someone bankrupt.
Until the bankruptcy is discharged it will not be possible to apple for a mortgage. However, once discharged, there may be some limited options.
In the event that you have previously owned property with a mortgage and had the property repossessed because of mortgage arrears, the chances of making a successful application for another mortgage are greatly reduced, certainly in the early years following the repossession.
Any decisions for lending will also be influenced by whether or not there is any outstanding debt following the sale of the property by the lender.