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What is a bad credit buy to let mortgage?
When people talk of a bad credit buy to let mortgage, they often refer to mortgages offered by lenders for investment properties where the applicant is, or has been, credit impaired.
Lenders have their own individual criteria, so different levels of adverse credit are acceptable to other lenders.
Some buy to let lenders unwillingly offer mortgages to applicants with adverse credit on their credit files.
Adverse credit is a complicated subject as it comes in many different forms.
Understanding how each lender will treat your application when there is adverse credit on your credit file is difficult.
As a result, it is recommended that you look for a mortgage adviser if you are looking at arranging a buy to let mortgage with adverse credit.
Make sure that you tell your mortgage adviser the full details of your bad credit, so they know which lenders to approach.
Buy to let mortgages are underwritten on the property’s value and the amount of rental income it will attract.
This is known as the stress test. Lender’s stress tests differ, which can result in a varying maximum loan across the lenders.
Suppose you tell your mortgage adviser details of your situation, the property value and how much rental income the property will generate. In that case, they will be able to calculate what your maximum loan is likely to be.
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Will all lenders offer you a bad credit buy to let mortgage?
Not all lenders will offer you a buy to let mortgage if you have adverse credit.
Some mortgage lenders require your credit file to be free from any adverse data, meaning no bad debt within the last six years (or potentially longer for bankruptcies, individual voluntary arrangements, debt management plans etc.) before they are willing to offer you a mortgage.
Some lenders have a different stance on the matter, so where one lender may consider a missed payment to a communications provider significant, another lender may be willing to ignore this event completely.
Due to the many different types of adverse credit, lenders that consider bad credit treat the events differently.
For instance, if you were to miss a payment on a £200 phone bill, this would not be seen as severe as a default on a £5,000 loan.
Different lenders will have their own rules about what is acceptable to them and what the thresholds are.
It may be that you are not able to use your lender of choice this time around, but within a couple of years, when your adverse credit data becomes older, you will fall back within the lender’s credit-impaired criteria.
An experienced mortgage adviser will know which lenders can consider your application based on the details on your credit file.
As a result, it is recommended that you get a copy of your credit report to show to your mortgage adviser, so they understand your full credit situation. If you want more details about your credit history, you can go to a website called Check My File to sign up for a free trial.
Can you get a bad credit buy to let mortgage if you are a first-time buyer?
Not all buy to let lenders offer mortgages to first time buyers as they want them to have purchased residential property first or already be a buy to let owner.
There are, however, some lenders that are willing to consider first time buyers for buy to let mortgages.
Some will require the applicant to be earning enough to have qualified for a residential mortgage for the same amount of lending.
This is to reduce their concerns that a buy to let property may become the applicant’s home, which would breach the mortgage terms.
Buy to let lenders do not have this rule and are happy to consider first time buyers as long as they meet the lender’s minimum income threshold—for instance, £20,000.
It may also be possible that a lender is available with no minimum income criteria that will lend to you as a first time buyer, even with some bad credit.
Lenders’ criteria change regularly, so it is recommended that you talk to an experienced mortgage adviser who can look for a lender that would consider your application based on your credit history and your first-time buyer status.
Would you need a mortgage broker for bad credit buy to let mortgage?
Mortgages are complex, even more so if you have had adverse credit in the past.
Not all lenders will consider you based on your adverse credit history, so finding a mortgage broker that understands the credit-impaired mortgage market is recommended to ensure that you do not waste time speaking with unsuitable lenders.
Most mortgage advisers will be willing to offer you a free consultation so that you understand your mortgage options.
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Can I get a bad credit buy to let mortgage with a low income?
It is possible to get a bad credit buy to let mortgage, even if your income is low.
Although some lenders have minimum income thresholds, this is not the case with every lender.
Buy to let lenders require your property to achieve the correct amount of rental income to qualify for the mortgage.
Once it has been confirmed that the property will do this, some lenders are not so concerned about your income as long as they are comfortable that you are in a position to meet your obligations and that they will be getting paid.
A mortgage adviser can confirm which lenders are available to you based on your income, property rental income and credit file.
Not all lenders will offer buy to let mortgages to people with bad credit, but there are some that specialise in this area.
Bad credit comes in many different forms, so where one event may be unacceptable to a lender, another may be completely fine.
A mortgage adviser must understand your credit history, full situation, and property details to look for a lender accordingly.
Most mortgage advisors will be willing to offer you a free consultation, so you know whether or not you wish to proceed.
If you would like I NEED ADVICE to match you with a qualified, regulated mortgage broker to explain your options. Please complete the contact form.