Buy to let mortgages with bad credit

How to get a buy to let mortgage with bad credit

There are lenders in the marketplace who are specifically set up to help investors get a buy to let mortgage with bad credit issues.

If you are affected it really helps to work with a specialist broker. Not all lenders can help borrowers with a poor credit history. Applying without knowing if you are likely to be accepted can be frustrating and incur costs.

As a specialist broker, with access to lenders from across the market, we are familiar with adverse credit lender criteria. We know where to start looking to find possible solutions, based on the type of credit issues you are managing.

Similarly, if you are not a current match for adverse credit buy to let lenders, we can to help you roadmap a path to being able to borrow and outline what you need to do to get there.

Check your credit profile thoroughly

It can be easy to overlook blips on your credit profile, by underestimating the importance of all aspects of your finances. There are some examples below, of credit you may accidentally overlook. These issues won’t stop you getting a mortgage, but we do need to know about them:

• Maybe you missed a payment for £5 on a store card – it doesn’t matter does it? Wrong. No matter how small the sum, a missed payment on a store card is a yes/no position on your credit report.
• Did you change a bank account, forget to set up a direct debit, and miss a bill payment? Tell us about this. Although you have settled the amount, the missed payment will still show on a credit report, so we need to know.
• Have you bought a sofa or white good with a promotion, e.g. ‘buy now with nothing to pay for six months’? This is a credit arrangement. We need to know about these.
• Do you have an account with a shop or store, where you have a payment plan to pay for goods? Did you reduce the amount and increase the number of payments? This affects your credit profile.

Don’t make this common mistake!

If you suspect you have issues with your credit that you think may impact getting a mortgage, don’t hold back in telling your mortgage advisor all the details.

Some people feel uncomfortable discussing financial issues with our advisors, or feel they should not have to share such personal information, but this can stop us being able to do our job. Or it can result in an application being made, which gets turned down unnecessarily.

To reassure you, if you have debt challenges:

1. We need to know because not all lenders can help where credit issues arise
2. This is a common issue that our advisors have dealt with on multiple occasions
3. We will not judge you, we just want to help
4. Your information is dealt with in complete confidence
5. Credit issues don’t always mean you cannot get a mortgage

The biggest barrier to us being able to get you a mortgage is for you not tell us all the details of your credit profile. Ultimately, any issues will come to light when the lender conducts a credit search on you, which happens as standard on every buy to let mortgage application.

Not telling us everything wastes time and could cost you money, for example, if a valuation has been undertaken by the lender that you will be charged for. We don’t want this to happen, and remember, not all credit issues stop us getting clients a mortgage.

Buy to let mortgage interest rates for adverse credit applicants

When it comes to applying for a buy to let mortgage with bad credit, the risk to the lender is higher and as a result, you are more likely to face higher mortgage interest rates than if this wasn't the case.

However, showing you can keep up with payments on a mortgage is a positive step. It will help 'rebuild' your credit profile.

With time, you may be able to change your mortgage product to a more favourable interest rate. A mortgage broker will be able to guide you on the timeframe necessary to rebuild your credit profile.

Using a buy to let mortgage to pay off other debts

If you have borrowed money using a number of different methods, you may find that the interest rate for repaying those debts is higher than the interest rate on a buy to let mortgage. For this reason, some people choose to pay off debts with a buy to let mortgage.

The most important thing to emphasise is that you should:

Think carefully before securing other debts against your property. Your property may be repossessed if you do not keep up repayments on your mortgage. By consolidating your debts into a mortgage you may be required to pay more over the entire term than you would with your existing debt.

This means that, the monthly payments you make on a mortgage may be cheaper and therefore more manageable for you. But, when you increase the period over which you repay a debt, the total amount you end up repaying might (or might not) be more than the total amount you would have paid, if you had not added the debt(s) to your mortgage.

It is important you work out if cheaper monthly payments are more beneficial to you than reducing your overall debt, if you can’t achieve both.

If you have any questions about the above explanation, do ask an advisor to explain it further and they will be happy to help.