Can I get an adverse credit buy to let mortgage?

Over the years, we have recieved many queries from the people asking for BTL mortgage but the problem is the bad or adverse credit score . It is true that lenders are more stringent towards borrowers with bad credit history and the chances of getting an approval for BTL mortgage become slim.

An adverse credit buy-to-let (BTL) mortgage is just what it says – a buy-to-let mortgage for someone with an adverse credit history. Can you get one? Yes, you can – though you might have to look a bit harder than usual.

But it is still possible to get a buy-to-let mortgage even if you have a poor credit score, though it might be more expensive or come with stricter terms. In this article on the topic “Can I get an adverse credit BTL mortgage?”, we will discuss the options available to the borrowers and what factors they should consider before taking up such a mortgage.

Post Topics

Can I get an adverse credit buy-to-let (BTL) mortgage

Mortgages and your credit history

What credit score do I need for a BTL mortgage?

Adverse credit buy-to-let (BTL) mortgage.

Rental income

A poor credit history and a BTL mortgage

FAQs

Can I get an adverse credit buy-to-let (BTL) mortgage

Yes, it is possible to get an adverse credit buy-to-let mortgage. However, such a mortgage will likely be more expensive or have stricter terms. Before taking up an adverse credit BTL mortgage, you should consider factors such as the size of the loan, interest rate, repayment term and whether it’s a fixed-rate or variable-rate mortgage.

When applying for an adverse credit BTL mortgage, it’s important to provide the lender with as much information as possible about your finances. This will help mortgage lenders understand your financial circumstances and assess whether you’re a good candidate for an adverse credit BTL mortgage. In addition, you should also ensure that you have a clear plan of how you’ll use the money from the loan to ensure that it’s a sustainable investment.

Many other factors can affect your mortgage application, but we suggest you contact a specialised mortgage broker to help you with your application process.

Mortgages and your credit history

When you apply for any kind of mortgage – including a BTL mortgage – one of the principal investigations any lender will make is about your credit history. Your credit history indicates how you have managed debt in the past, whether you have made repayments on time, or if you have missed some altogether – all as a way of trying to determine whether you are likely to repay the mortgage loan for which you are now applying.

If you have defaulted on the repayment of past debts or credit, had to make individual voluntary arrangements (IVAs) with creditors, received county court judgments (CCJs) against you, or ever declared bankruptcy, you will be given a low credit score. A low credit score means it is likely to prove tough to get a mortgage, warned Which? magazine in an article last updated in March 2020

What credit score do I need for a BTL mortgage?

The credit reference agency Experian explodes the myth that your credit history gives you just one credit score.

That is simply not the case. Whenever you apply for a mortgage – or, indeed, any other kind of credit – the lender will work out a credit score for you based on its own lending criteria.

In the same way, the credit reference agencies also calculate their own credit score for you. Typically, the higher the score, the more likely you will be granted the loan or credit you are applying for. For example, in Experian’s case, credit scores run from a high of 999 down to zero. The higher the score, the more qualified you are likely to be for the most attractive mortgage deals and rates – but with a low score, you could be struggling to get a mortgage.

Adverse credit buy-to-let (BTL) mortgage.

It is not just your credit score that potential lenders want to examine. Your past record of managing debt might tell them something about what to expect in the future, but any new mortgage also needs to be affordable. Will you be able to make the mortgage repayments from the income you receive, less the expenses and other expenditures you are likely to be making?

At this point, of course, a buy-to-let mortgage differs from a standard residential mortgage designed for the home owner-occupier.

Decisions on whether to grant BTL mortgages are made on the strength of the business case made by the prospective landlord. Will the anticipated rental income from the let property be sufficient both to cover the monthly mortgage repayments and meet all the running expenses – such as repairs, maintenance, and landlord’s insurance?

Rental income

For that reason, BTL mortgage lenders typically look for a rental income equivalent to at least 125% of the mortgage repayments. The strength of the business case – evidence that projected rental income is likely to exceed that minimum 125% significantly, for example – may take priority over the borrower’s poor credit history. The lender may be prepared to exercise greater flexibility towards a BTL applicant with a poor credit history if the business case for the loan is especially strong.

If rental income is merely hovering around the lender’s minimum guidelines, and with everything else being equal, the applicant with adverse credit may be offered less favourable borrowing terms.

The loan to valueThe ratio of the mortgage amount to the value of the propert... (LTV) ratio of the BTL mortgage to the value of the property may be lowered, for example – so that you would have to find a bigger deposit – or you might be offered a less competitive rate of interest on your mortgage deal.

A poor credit history and a BTL mortgage

Even if you have adverse credit, however, the type of BTL mortgage you are likely to be offered is likely to be the same as that offered to other applicants – namely, an interest-only mortgage. With such a mortgage, you repay only the interest accruing on your mortgage in the instalments paid each month while repayment of the capital loan is delayed until the end of the mortgage loan. It is at that stage, therefore, that the typical BTL landlord sells the property and repays the mortgage capital from the sale of a property that has appreciated in value over the preceding years.

Seeking specialist advice from an adverse credit buy to let mortgage broker may be your next step.

We suggest you get copies of your credit file. It is best to check dates and details of any defaultsMissed payments on credit accounts, which can affect a borro..., CCjs, missed payments.

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FAQs

How Does a Poor Credit History Impact a Buy-to-Let Mortgage Application?

Your credit history, including any adverse credit events or poor credit records, is crucial in your mortgage application. Mortgage lenders, including street banks and specialist lenders, review your credit file to assess your lending risk. A history of missed payments, mortgage arrears, or defaults can limit your options and affect the terms offered.

What is the Minimum Deposit Required for a Buy-to-Let Mortgage with a Poor Credit Record?

The minimum deposit for a buy-to-let mortgage can vary, especially if you have a poor credit history. Applicants with credit problems may need to provide a more substantial deposit compared to those with a clean credit record, acting as security against potential risks associated with lending to individuals with a history of bad credit issues.

Can I Obtain a Buy-to-Let Mortgage with a History of Missed Payments or Defaults?

Yes, securing a buy-to-let mortgage with a history of missed payments, defaults, or other bad credit events is possible. However, your options may be limited to bad credit mortgage brokers or specialist mortgage lenders who offer products tailored for applicants with credit problems. These mortgages might come with higher interest rates or require a larger deposit.

How Important is a Credit CheckA check of a borrower's credit history, which is used by mor... in the Buy-to-Let Mortgage Process?

A credit check is a crucial step in the mortgage application process. It helps lenders assess your credit score, credit report, and overall credit profile, understanding your financial conduct, including any unsecured arrears, outstanding debts, or credit card payments, which influence their lending decision.

What Role Does an Experienced Mortgage Broker Play for Applicants with Poor Credit?

An experienced mortgage broker, especially one specialising in bad credit mortgages, can be invaluable. They have knowledge of the mortgage market and access to exclusive deals, often not available directly from street lenders. They can guide you towards competitive deals that suit your individual circumstances, including your credit record and financial circumstances.

Are There Specific Mortgages for People with Severe Credit Issues, Like a County Court Judgment or a Debt Management Plan?

Yes, there are specific mortgage products designed for individuals with severe credit issues, including those with a County Court Judgment (CCJ) or those under a debt management plan. Specialist mortgage lenders often provide these products, considering each case based on its merits and the applicant’s current financial situation.

How Does My Personal Income and Rental Income Affect My Mortgage Application?

Lenders assess both your personal income and potential rental income from the investment property. This affordability assessment helps determine your ability to make monthly mortgage repayments. Having a stable personal income, disposable income, or extra income can positively impact your application, especially if your credit history is less than perfect.

What Are the Differences Between Residential Mortgages and Buy-to-Let Mortgages for Applicants with Poor Credit?

The key difference lies in the assessment criteria. For a residential mortgage, the focus is primarily on your personal income and credit history. In contrast, for a buy-to-let mortgage, lenders also consider the potential rental income from the property. However, for both types of mortgages, a poor credit history can lead to higher interest rates and the need for a larger deposit.

Can Experienced Landlords with Bad Credit Access More Competitive Mortgage Rates?

Experienced landlords might access more competitive mortgage rates, even with a bad credit history. Lenders may view their experience in property management and existing rental income favourably, potentially offsetting some of the risks associated with their credit profile.

What Steps Can I Take to Improve My Chances of Getting a Buy-to-Let Mortgage with a Poor Credit Record?

Improving your credit score, clearing outstanding debts, and building a record of stable income can enhance your mortgage prospects. Working with a bad credit mortgage broker can also help you find a more suitable mortgage deal based on your specific financial circumstances and credit history.