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Buy To Let Mortgages With Bad Credit

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Author: Carl Shave-Director
Updated on June 14th, 2022



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I have Bad Credit – Can I get a Buy to Let Mortgage?

Getting a Buy to Let mortgage while you have bad credit on your files can be a little more difficult, but there are some aspects to Buy to Let that might make it easier for you than if you had been applying for a standard residential mortgage, despite some lenders’ reticence towards applicants with adverse credit.

A Buy to Let arrangement has much more in common with a business proposition than a simple home loan to buy somewhere to live, and as such the decision to lend will be influenced more by the anticipated rental revenue, balanced against the maintenance and mortgage costs, than your own personal income. Therefore, while lenders will typically want to see a minimal independent income from yourself, concerns over your personal finances may take second place to the potential cash flow that the property will generate.

Lenders of Buy to Let mortgages have been historically averse to working with people with bad credit events on their files, and you usually needed to have a clean credit history in order to become a landlord. However, times have changed and, while mainstream lenders are still likely to decline your application, you should be able to obtain a mortgage to meet your needs from one of the many specialist lenders who entered the market to help those people who the high street providers cut adrift.

Can I Remortgage my Buy to Let property If I have Poor Credit?

As with an initial Buy to Let mortgage, it is indeed possible to remortgage your rental property if you have a poor credit rating or bad credit events on your records. However, you may need to jump through a few more hoops than most and go the extra mile to prove both your creditworthiness and the projected revenue from your rental business.

Whatever the nature of your adverse credit issue, you may wish to remortgage for a number of reasons:

  • Your rental property is now unencumbered (no longer has any debt outstanding on the mortgage used to buy it, nor any second charge loan where it acted as security), and remortgaging it will raise capital to fund an additional property purchase.
  • Your current mortgage deal is reaching the end of its introductory period and will soon increase to a standard basic interest rate, so you want to remortgage to find a similar product with a more favourable rate and avoid paying more interest than necessary.
  • You are reaching the end of your current deal as above and the interest rate is about to increase, but you are also looking to free up some of the equity in the property to fund home improvements and/or alterations.
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The level of equity you already have in the property will have a great deal of influence over a lender’s decision, and the more investment you can show, the greater the level of security will be to the lender. Obviously, any gains in value due to general house price increases since the initial purchase will stand in your favour.

If you have a poor credit record, then this may create an obstacle with some lenders, but how much of an obstacle will depend on the nature of any bad credit items on your file, the amount of money involved, how long ago they occurred and what your credit record has been like since that time.

To find out exactly what options will be open to you for a remortgage on a Buy to Let property when you have poor credit, please speak to one of our advisers today and arrange a free, no-obligation initial consultation.

Buy to Let with Bad Credit Information

I have Bad Credit - How much deposit do I need for a Buy to Let Property?

Even when applying for a Buy to Let mortgage under normal circumstances, with borrowers having a clean credit record, they will still be required to supply a larger-than-average level of deposit – usually a minimum of 15–25%. If you are looking to obtain a Buy to Let mortgage with adverse credit items on your financial records, then it will inevitably be the case that you will need to provide a higher amount – at the very least the upper end of the usual minimum.

The exact amount of deposit that you need to provide will depend very much on which lender you talk to and the exact details of your circumstances – the nature of your adverse credit, what sums were involved, how long it has been since it occurred, your more recent patterns of borrowing and repayments, and so on.

Whatever the situation, it’s worth bearing in mind that the higher the deposit you can provide, the greater will be your choice of lenders to approach, and the better the other aspects of your mortgage deal will also be. You’ll be far more likely to gain access to products with more favourable interest rates and lower fees than you would have otherwise when applying with bad credit.

If you are an experienced landlord with a portfolio of properties, some specialist mortgage lenders will be willing to consider your total assets when making their decision, allowing for the security in the equity and value within your whole portfolio to offset the pressure to provide a larger deposit.

How do I a get Buy to Let Mortgage with Bad Credit?

In the past, you may have been forgiven for thinking that applying for a Buy to Let mortgage with bad credit would be a fruitless task. After all, trying to get a conventional residential mortgage with adverse credit events on your file can be difficult enough. However, the market has changed in more recent years, and with more specialist lenders entering the sector and greater competition between providers, you will find that there are many more options open to you than before.

Both bad credit mortgages and Buy to Let mortgages are usually specialised areas of lending in their own right. By combining the two, you may think that you might be doubling your chances of an issue, but this is not necessarily the case. The nature of the mortgage and your circumstances will mean that you will need to work with a specialist expert mortgage broker in order to get the finance you need, and their experience will make the whole process far more straightforward than it would have been otherwise.

A specialist mortgage expert will take a close look at your entire circumstances, run assessments on your affordability that mirror those used by lenders, make enquiries on your behalf and, when the time comes, will help you frame your Buy to Let mortgage application in the most positive light so that it stands the greatest chance of success.

If you have bad credit issues when applying for a Buy to Let mortgage, it will be vitally important to have thoroughly prepared your anticipated budgets (based on real figures for costs and income as much as possible) and projections for the next few years, allowing for times when the property may lie empty. As well as allowing you to see the full picture yourself, this will help show mortgage providers that you can be taken seriously as a lending prospect.

The specialist lenders you’ll need to approach for a Buy to Let mortgage with adverse credit only usually accept applications made via a trusted intermediary, such as ourselves here at The Mortgage Centres. This measure protects all parties from unnecessary enquiries, ensures that the borrower and lender will be well matched, and saves a great deal of time and stress. Contact our team today to learn more about your options.

I have defaults - Can I obtain a Buy to Let Mortgage

You will have been served a default notice after a series of missed payments on a variety of lines of credit. It could relate to a store card, credit card, bank loan, hire-purchase agreement or any other kind of borrowing where you are paying off in regular agreed instalments. This will usually happen after missing between three and six instalments, depending on the amount of money involved, and your creditor will have already written to you on one or more occasions to advise you that you were in arrears and could face more serious action if payments were not received.

Having a default notice to your name will give a lender pause for thought when considering your application for a Buy to Let mortgage. For many people, simply receiving the default letter will make them take the situation seriously and be the spur into action they needed to arrange payments and settle the debt. If the matter is resolved quickly in this way, and the entry on your credit record amended to reflect this, then this will have a positive effect on the lender’s view of your application.

If you have one or more defaults as yet unresolved, or you are still working through a renegotiated payment plan, then a number of lenders in the specialist mortgage sector who will take a wider view of your circumstances and consider the factors around your defaults and why they happened. Not all defaults occur because of poor money management. You may have unexpectedly lost your job, or become very ill and lost your income because of this, or had to pay out large sums on emergency repairs, thus impacting your ability to pay off lines of credit.

They will also consider the number of defaults on your file, the amount of time that has passed since the defaults occurred, and the amount of money involved. A string of defaults in the last twelve months will have a lot more impact than a single case three or more years ago, especially if you have kept a clean record since then.

If you are concerned about your chances to obtain a Buy to Let mortgage with defaults on your credit report, don’t hesitate to contact our team to find out exactly what options are available to you.

Can I get a Buy to Let Mortgage If I have CCJ's?

You will have been subject to a County Court Judgment (CCJ) in the past if your creditors took you to court over monies owed after a series of missed payments or defaults, and you either did not acknowledge the legal action or were unsuccessful in your defence. Having a CCJ on your credit records will have a strong negative impact on your chances of getting any kind of mortgage – including one for a Buy to Let property – and it is in your interest to do what you can to settle the debt and get it removed.

The County Court decision over your debts will have found you legally responsible for the monies owed and you would have been bound by its terms to repay your creditors. At this point, when the judgment was made, you had the opportunity to pay off the debt straight away. If you did so, the CCJ would have been annulled and will not feature on your credit record.

However, if this was beyond your means at the time or you chose not to pay, then a CCJ would have been registered against your name in the public Register of Judgements, Orders & Fines, and would show up on your credit records. You are able to get a CCJ removed from your record relatively quickly after this by paying it off within a month. However, if you settled the debt more than a month after it was registered, the CCJ remains on your record but is marked as ‘satisfied’, showing anyone running a credit check that you paid what was owed. A CCJ will remain on your file for six years, after which time it will no longer feature.

Having a CCJ still on your file will present a problem to many lenders, especially if it has not been settled. However, you may be able to obtain a mortgage from one of the many specialist mortgage lenders on the market who handle applications from people with bad credit. They will take a wider view of your circumstances and place more weight on your current financial situation – allowing for when the CCJ was made, how much time has passed and your borrowing history since.

I have a Debt Management Plan - Can I get a Buy to Let Mortgage?

You will have entered into a Debt Management Plan (DMP) as a way to reorganise your debts and repayments to be more manageable and affordable, with the consent of your creditors. This may have been because you built up several smaller lines of credit that you found too difficult to maintain and needed the mechanism of a DMP to bring the situation under control – the terms of the plan entail the debts being frozen, so no more interest can accumulate, nor more charges added – while you pay them off, usually with reduced monthly payments.

While being in a DMP will show lenders that you were willing to take responsibility for your debts and organise a way to settle them, it will still have a negative effect on your credit record. The reduced payments under the DMP basically mean you are reneging on the agreement terms of the loan or line of credit every time your monthly instalments are less than they should be, which can entail additional ‘missed payment’ notices showing up on your credit report.

It’s also often the case that some debts within the DMP will have been registered as defaults, further worsening the situation. It’s not uncommon for us to see defaults and a DMP going hand-in-hand, as the potential applicant is likely to have tried to work their way through a challenging situation and missing payments for some time before going to an advisor for help, meaning many creditors will have been pushed to take further measures.

Having a DMP against your name can cause a problem with many Buy to Let mortgage providers, and the number of lending options open to you will be much reduced, but there could be a number of specialist lenders in the bad credit niche of the mortgage market who will be willing to help you. You may need to pay a higher deposit than the standard percentage, but you should be able to get a loan if the DMP was served at least three to six years ago, especially if you have kept a clean credit history since that time.

If you are currently in a DMP, then this could be a major issue for your chances of getting a Buy to Let mortgage, and not only due to its effect on a lender’s perspective. As a DMP only comes into play when people are in financial trouble, without any disposable income to use for savings, your main problem may not be the Debt Management Plan itself, but an inability to save up enough for a deposit.

Can you get a Buy to Let Mortgage after an IVA?

You will have been subject to an Individual Voluntary Arrangement (IVA) if you found that you were no longer able to maintain payments on various borrowing arrangements or lines of credit and were willing to enter into an official agreement to make what repayments you are realistically able to on your debts. Having one on your file will certainly adversely affect a lender’s view of your Buy to Let mortgage application, but it will not preclude it altogether.

As a type of insolvency, an IVA is legally binding, typically runs for five years and has to be managed by a professional IVA practitioner – usually a suitably qualified accountant or solicitor. Acting as the intermediary between you and your creditors, they will work with you to devise a repayment schedule that combines what you owe into one overall debt for you to service with regular monthly payments that are within your means, which they will then divide among your creditors after taking their fee. As this will usually entail creditors receiving less money than was originally arranged under the credit agreement, they will also have to agree to this scheme. Once the IVA has reached duration, the debts are considered settled and any remaining amounts outstanding are written off.

If you have settled your IVA, and have no other credit issues, then there is no reason why you should not apply for a Buy to Let mortgage. Its presence on your credit record will pose a problem for high street lenders, but there are a number of specialist mortgage providers who will be happy to consider giving you a mortgage after an IVA. These lenders have far more flexible assessment criteria for mortgage applicants, and will take your wider circumstances into consideration, as well as your more recent credit history and financial status before making a decision.

To find out which specialist lenders will be able to help you with a Buy to Let mortgage after an IVA, and what interest rates you should expect, get in touch with our team today to arrange a no-obligation initial discussion.

Buy to let Mortgage rates If I have Bad Credit

Buy to Let mortgage rates can be typically higher than those for a conventional residential mortgage, but if you are applying for a mortgage on a property you intend to rent out while you have bad credit issues on your files, then you can unfortunately expect the rate to be a little higher still. Lenders will be carrying out the same kind of credit checks on you for a Buy to Let arrangement as they would if you were purchasing or remortgaging your place of residence.

As a perceived higher lending risk – although the level of this will obviously depend on the nature of your bad credit and how long ago it occurred – a mortgage provider will compensate for this by imposing a higher interest rate. A recent adverse credit event, or even just a low credit score due to limited borrowing, can negatively impact your application and restrict your ability to access the most favourable deals. In fact, it might preclude you from a mortgage from a high street lender completely.

Your best bet for the most competitive interest rate on a Buy to Let mortgage with bad credit will probably be found among the products offered by the number of specialist lenders in the market who cater to clients who have experienced credit problems in the past.

While it’s true that mortgage rates from specialist lenders will be higher than those from their mainstream counterparts, they will at least give you the opportunity to obtain the mortgage and start earning revenue from renting out your Buy to Let property. At a future date, when the bad credit has slipped off the six-year scope of credit reports and your history will be far more respectable, we will be able to look at switching your mortgage to a more competitive product or renegotiate a more favourable rate from your lender.

Another way to get access to a lower interest rate is to provide a larger than average deposit, showing commitment to the mortgage on your part and acting as greater security to the lender. This will obviously depend on your resources, which may have been limited if you recently experienced financial issues. To learn more about which products with the most favourable rates will be available to you in your current circumstances, talk to one of our expert advisers today.

Buy to Let Mortgage Lenders with adverse Credit

If you’re trying to get a Buy to Let mortgage with adverse credit events on your credit file, or a poor credit rating, then you are likely to find that mainstream lenders will be unwilling to lend to you, or if they are then the terms will probably be prohibitive. The most suitable mortgage lenders to suit your situation will be those operating in the specialist area of the market, catering specifically to people with bad credit on their records. Although they are smaller than the mainstream lenders, they still have to abide by the same strict lending rules and regulations, and your mortgage and your home will be just as secure as with a major lender.

Specialist lenders are far more flexible in their criteria when it comes to considering applications from borrowers with a chequered financial past. Instead of simply focusing on a negative event, or a low numerical score, they will take your entire circumstances into consideration, place more emphasis on your current financial status and see your past problems in context. They understand that circumstances change with time.

However, they do not advertise their services publicly, and you will not find them on the high street nor mentioned in any online tables or ‘best buy’ lists. Due to the more complex nature of their process, they will only consider applications made through a trusted third party, like an established unlimited mortgage broker such as ourselves, which ensures that their mortgage products are a good fit for the borrower, and vice versa.

If you have suffered financial issues in the past, then it’s important to approach the right lenders in order to avoid your application being declined and a further black mark added to your credit record. At The Mortgage Centres, we are able to undertake a thorough review of your past and current circumstances, examine your credit history to identify where the most pressing problems lie, and then help you frame your application in the most positive light, giving your application the best chance of success.

Buy to Let Mortgage Advice If I have Bad Credit

If you have black marks on your credit record, or simply a bad credit score, then it might make the process of obtaining a Buy to Let mortgage a little more challenging, but it is by no means impossible. With the right guidance and advice that takes all your circumstances and goals into account and matches you with the most suitable lender and mortgage deal to meet your needs and aims, you can soon be on your way to acquiring a rental property – whether it’s your first or adding to your portfolio.

As a Buy to Let property is as much a business proposition as a home for your tenants and an investment for the future, the way you approach the mortgage for it will have subtle differences from a normal residential mortgage. When making their decision, the lender will place more weight on the anticipated rental revenue from the property, balanced against your costs, than on your own personal income when it comes to your ability to meet mortgage repayments, so a slightly tarnished credit record might not be a huge obstacle.

The nature of the adverse credit on your records will have an impact on your application. Lenders will pay attention to the kind of issue, the amounts of money involved and how much time has passed since problems occurred, as well as your more recent credit history, – in order to form a judgement on your creditworthiness and potential to keep up with regular repayments. With any kind of bad credit, your choice of lenders will be more limited, usually ruling out the high street providers, but a number of the specialist lenders in the market should be in a position to help you.

As specialist mortgage brokers, we are able to greatly improve your chances of obtaining a Buy to Let mortgage. We have excellent ongoing relationships with mortgage lenders across the full spectrum of the UK market, in-depth knowledge of new offers and trends within the sector and a huge amount of experience in helping people with adverse credit get mortgages to meet their needs. We completely understand the problems you have had to deal with, and through our processes of assessment and search, we are confident that we will be able to connect you with the most suitable lender and product for your circumstances. To find out what your options could be for a Buy to Let mortgage with bad credit, give us a call today.

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