Adverse Credit Buy to Let Mortgages

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Adverse Credit Buy To Let Mortgages

Owning a buy to let property is a great way to earn a regular income from an asset that keeps growing in value.

Getting the go-ahead on a mortgage offering the most competitive rate can save you hundreds of pounds each year. The question is, can you get a mortgage if you have an adverse credit record?
Applying for a buy to let mortgage from a high street lender may result in rejection that could affect your credit score even more. So getting it right the first time is critical.

The best way to increase your chances is to discuss your buy to let mortgage options with an authorised and regulated mortgage adviser straight away.

With access to providers you won’t find on the high street, an experienced adviser will take your application to the BTL mortgage lenders most likely to accept your adverse credit application.

Can I Get A Buy To Let Mortgage With Bad Credit?

Everyone’s individual situation is different when it comes to adverse credit, and different lenders will have their own ‘bad credit’ tolerance levels. What may show up as a red flag for one lender, may get the green light from another.

Be aware that all lenders will carry out a credit check, but don’t let that stop you, as you may be surprised. Well-known high street banks are traditionally risk averse, however building societies may be more tolerant depending on your credit score.
There are also specialist lenders that are prepared to accept applications from prospective clients who have a poor credit rating through no fault of their own.
So, even if you do have a history of bad credit, a buy to let mortgage from a specialist lender may be well within your reach.

Are There Adverse Credit Lenders For Landlords?

Yes there are some lenders that specialise in applications from potential landlords who have an adverse credit rating.

It’s true to say that because the repayments on your Buy to Let mortgage will be covered by the rental income paid by your tenants, a specialist lender will be interested in how secure that rental income will be.

That said, they will be just as concerned about whether you’ll be able to afford the mortgage repayment if your property is without paying tenants for a period of time.

For this reason they will carry out a credit check and apply a ‘stress test’ to calculate how much to lend you.

Credit Issues That Could Affect Your BTL Mortgage

Some credit issues can be easily explained and may not preclude you from a BTL mortgage offer.  Before applying, check your credit record by signing up to online credit bureaus Experian, Equifax, UK Credit Ratings and Check My File.

Low credit score – based on your credit history, age, income and where you live, you may have a low credit score if you’ve moved many times or even if you’ve never had a credit card.

Late payments – it’s not unusual to have the odd missed payment on your file, some may go back years.  Late payments on a mortgage will have a higher weighting than a late payment on a phone bill.

Mortgage arrears – if you have recent outstanding mortgage payments on an existing BTL or residential property, they’ll be taken seriously.  If historic, a lender may waive them.

Defaults – a lender will send you a default notice if you’ve missed a series of payments. If historic and the debt is cleared, chances are this won’t be an issue.

County Court Judgements (CCJs) – if someone takes court action against you because you owe them money, a CCJ will remain on your file for six years. The older it is, the less of an issue it will be.

Debt Management Plans – are a way of paying off debt owed to more than one company. Being accepted for a Buy to Let mortgage will depend on how well you manage your DMP and any other credit issues you have.

Individual Voluntary Arrangements (IVA) – this is an arrangement to pay those you owe money to, to avoid insolvency and bankruptcy.  Being accepted for a Buy to Let mortgage will depend on your individual situation.

Bankruptcy – while most lenders will reject your application if you have been made bankrupt, there are some specialist lenders who will.

Repossession –  if you’ve had a residential or Buy to Let property repossessed, you may struggle to get another mortgage.  However, it will depend on the reason, your deposit, and expected rental income.

Other Factors Could Affect Your BTL Mortgage Application

Affordability And Poor Credit – A lender will want assurance that you’ll be able to afford the repayments on your mortgage if the property has no tenants for a period of time.

They will carry out an affordability ‘stress test’ to make sure you’re not taking on too much of a financial burden. This will depend on the rental income you can expect, your overall financial outlook, including your assets, liabilities and deposit.

Your age may also be a factor. Some lenders will consider you too much of a risk if you’re aged over 70, as a long-term mortgage could exceed your longevity. However, there are other lenders who do not set an upper age limit.

How Much Deposit Do I Need For A Buy to Let With Adverse Credit?

The higher your deposit, the more favourably your application will be viewed by a lender.
It will depend on the amount of loan to value (LTV) the mortgage provider will be prepared to lend you based on the price of the property you want to buy.

If you can put down £30,000 on a £150,000 property, that will be an LTV of 80%.  If you own other properties these will be taken into consideration.

How Spot On Mortgages Can Help You Apply For A Buy to Let Mortgage?

Finding a lender that will offer you a mortgage based on your financial situation will take a lot of time and effort if you go it alone.

If you have an adverse credit record we can save you time by helping you prepare your mortgage application and approach the lenders we work with, on your behalf. This will increase your chances of being accepted first time around.

As authorised mortgage advisers, we are regulated by the Financial Conduct Authority and fully qualified to discuss your mortgage options. We have years of experience and knowledge to help you achieve your property ownership aspirations, whatever your circumstances.

We always aim to save you money by approaching the lenders who offer the most competitive interest rates and flexible repayment options.



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