There are a lot of misconceptions about the mortgage industry – and one of them is that it will be nigh on impossible to secure a Buy to Let mortgage if you have a low credit score.
While it’s true that missed payments, late payments, defaults, CCJs and discharges from bankruptcy can limit the number of providers who are willing to lend to you, there are still many companies out there who will look at your application in broader terms before coming to a decision, without dismissing you right away. Many of these lenders are more concerned about your ability to make repayments on your investment property than your credit history, so as long as your rental income exceeds the monthly outgoings on your mortgage, you’ll be in a strong position.
What to consider when applying for a Buy to Let mortgage
A Buy to Let (BTL) mortgage is designed for people who are looking to purchase additional property and rent it out in order to make a profit on their initial investment. In the UK, there are no limits on how many properties one person can own – so, as long as you understand your responsibilities and duties as a landlord, it can be an incredibly lucrative way to generate capital.
When looking for a Buy to Let mortgage, price is a very important factor, as it will directly affect the viability of your investment. When working out how much you can afford, you will need to consider how much you will need to set aside for the payments on your residential mortgage (if you have one), as well as any other financial commitments that could affect your ability to keep on top of your BTL mortgage repayments. Remember, too, that Buy to Let deposits are significantly larger than those for a standard residential mortgage. You will usually need a bigger down payment to not only secure a mortgage in the first place but access the most competitive rates.
Buy to Let mortgages have been notoriously difficult to obtain in the past due to stringent income and affordability checks, not to mention volatile markets. For the best chance of success, it’s important to explore all your available options before making a decision on which lender to use.
How will having a low credit score affect your BTL mortgage application?
If you borrow money from a lender and have difficulty paying it back on time, this will have a negative impact on your credit score and may make it much harder to borrow again in future. In turn, having a low credit score means that the information held on your credit file will be viewed negatively by lenders. This will affect your chances of securing any sort of finance, including a Buy to Let mortgage on an investment property.
Other factors that can adversely impact your credit rating include:
County Court Judgements (CCJs)
Defaults on your credit file
Too many hard searches on your credit file
An Individual Voluntary Arrangement (IVA), Debt Management Plan (DMP) or Debt Relief Order (DRO)
Even those who have not built up their credit history yet can be considered as having bad credit. For example, if you’re a young adult who is new to finance, or someone who has just moved to the UK from overseas, lenders will have no record of your ability to manage your money and may be reluctant to enter into an agreement with you.
Whilst having bad credit can make it more difficult to get a Buy to Let mortgage with some of the more well-known banks and High Street lenders, different companies have different eligibility criteria, so it may still be possible to find a lender that will accept your mortgage application.
Why use a mortgage broker?
It can be difficult to know who to turn to for the best advice. If you’re keen to invest in a Buy to Let property, but you’re worried that past mistakes might be holding you back, arrange a consultation with one of our mortgage advisers. They will be able to carry out an honest assessment of your circumstances, then search the whole of the market to find a provider who may be willing to consider your case.
You can book an appointment during the evening or at the weekend, and you can tap into our team’s incredible knowledge by email, via our web chat feature, over the phone, or face-to-face.