Bad Credit Buy to Let Mortgages 

Buying a property to rent out is an appealing way to boost your income and invest for your future. But if you have a poor credit rating, will this hamper your chances of getting a buy to let mortgage?

Can I get a Buy To Let mortgage with bad credit?

While poor credit can certainly set you back when buying your own home, it can actually be less of an issue when you’re buying to let. 

The reason is that a buy to let mortgage is seen more as a business loan than a traditional mortgage. Ultimately, your tenants will be responsible for the monthly payments, rather than you personally. 

That said, credit issues could still affect your mortgage application. Typical issues that may cause a poor credit rating include:

• Late payments on loans or credit cards
• Falling into mortgage arrears
• Defaulting on a loan
• County Court Judgements (CCJs)
• Having to put Debt Management Plans in place
• Individual Voluntary Arrangements (IVA)
• Bankruptcy
• Being subject to repossessions in the past

Do lenders specialise in BTL Mortgages for people with bad credit?

Every lender is different when it comes to their criteria for potential customers. In general, though, high street lenders often look less favourably on people with bad credit.

So if you’re thinking about buying a home to let out, don’t apply for any mortgages without seeking expert help. Applying for a buy to let mortgage will appear on your credit record – and too many applications in a short space of time could damage your credit score further.

A Mortgage Adviser will be able to recommend specialist lenders that are more likely to approve you. While you may be accepted, bear in mind that the interest rate is likely to be higher than for a standard customer.

How much deposit will I need for a BTL mortgage if I have bad credit?

It’s likely that lenders will want to see a good deposit from you to approve your mortgage. Most buy to let mortgage companies will want at least 25% of the property value as a deposit. To overcome your poor credit score and be accepted, you might need up to 40% deposit or even more.

What other factors will affect me getting a buy to let mortgage in the UK with bad credit?

The reason behind your negative credit score can be a big factor in whether you can get a buy to let mortgage. For example, defaulting on a mortgage by a single payment is much less likely to cause serious issues than bankruptcy, an IVA or repossession. Again, a Mortgage Adviser will be able to give you an honest view on your options. 

You will also need to have done your homework about the buy to let property market in your chosen area. You will need to prove you can generate a good rental income that will more than cover the repayments on your mortgage. 

For many lenders, rental income needs to cover 125% of the mortgage, and this increases for higher rate taxpayers.

Age can also be a factor. Most buy to let mortgage lenders won’t accept people over 70 years old – although sometimes this extends to 75.

How does affordability affect a BTL mortgage with poor credit?

Although your tenants will be paying the mortgage each month, there may be times when your property is vacant. Lenders will therefore want to know that you have sufficient funds to cover the mortgage payments. 

You can expect lenders to want a lot of detail about your financial income and outgoings as part of your application. 

Is it worth trying to improve credit scores before becoming a landlord?

As you know, having bad credit can make it much more difficult to borrow money and your mortgage rate will likely be higher.  With lower credit limits, applying for credit generally becomes much more difficult.

Some people choose to work at improving their credit scores before taking on a mortgage. One option is to switch to special credit cards for bad credit and seek opportunities for balance transfer. The priority is then to reduce your debt as quickly as possible – and make sure you never miss a repayment. 

Meanwhile, other people find that if they can get a buy to let mortgage they can rapidly improve their credit position.

How can a Mortgage Adviser help?

It’s always worth seeking expert advice when it comes to financial decisions, but it’s even more important if you have bad credit.

Advisers are highly experienced in helping people with adverse credit history and the types of issues that can affect your credit scores.

When choosing an adviser, always check that they state their accreditations and that they have access to many market lenders.