Can I Get a Buy-to-Let Mortgage With Bad Credit?

Can you get a buy-to-let mortgage with bad credit?

Yes, it’s possible. It will really depend on the type of bad credit issue you’ve had, when it happened and how much it was for. Getting a buy-to-let mortgage with bad credit won’t be as straightforward as it would be for someone with a perfect credit score, but it’s certainly not out of the question.

If you have bad credit and you want a buy-to-let mortgage then you’ll stand a better chance by speaking with a specialist lender who will assess applicants on a case-by-case basis, as most high street banks and mainstream lenders use a computer checklist which could see bad credit as a red flag and reject your application.

What credit issues affect buy-to-let mortgages?

The success of your application will largely depend on the type of bad credit you have and how long it’s been registered on your credit file.

So, first things first, you need to find out what your credit issues are, when they happened and how much you owe. For this purpose, we recommend Checkmyfile**. Your Checkmyfile credit report shows you data from the three major UK credit reference agencies - Experian, Equifax, and TransUnion.

Read our Checkmyfile Explained Guide, so you can find out how to use their service. 

**When you click through to our affiliate links, we may earn a small commission at no extra cost to you. We only recommend sites we trust and believe in.

The following credit issues could all affect your buy-to-let mortgage application.

Late payments

Making a late payment on a bill happens to a lot of people in their life. Some lenders might look at late payments badly but the majority of lenders understand that late payments are common and not the most severe credit issue. Mortgage lenders can still offer competitive rates and higher loan-to-value ratios to landlords who have made late payments before. How many late payments you’ve got on your credit record and how long ago they were will determine how seriously they take it.

For example, if you made one late payment 3 years ago, you’ll be looked at a lot more favourably than if you’ve had multiple late payments in the last year.

Having a history of late payments is different from being in arrears. Late payments tend to refer to the odd late payment against an account. Usually, if the payment is made within the same month it’s due, then most lenders won’t report it as a missed payment to credit agencies.

Being in arrears is when payments have remained unsettled for longer than a month. If you owe more than any current month’s repayment then you’ll be considered to be in arrears on that account.

What’s also important is the type of account you’ve missed a payment for, this has a huge impact on your mortgage application being accepted.

Missed payments on unsecured accounts won’t be as much of a red flag to lenders as missed payments on secured credit will be. Examples of unsecured credit are phone bills, credit cards, personal loans, phone bills and current account overdrafts. 

Mortgage arrears

Your account goes into arrears when you have missed payments that remain unpaid for more than one month. You’re classed as being ‘in arrears’ when you’re currently owing more than your current month’s payments. Your mortgage will be in arrears when you’ve missed mortgage repayments and they’re overdue.

Mortgage arrears on buy-to-let properties are viewed by lenders the same way they view other missed payments on secure credit. Falling into mortgage arrears for more than one month might make lenders feel you have an inability to repay and this can affect your creditworthiness.

A landlord with multiple mortgages on multiple properties might’ve found themselves falling behind on mortgage payments. Being able to provide a justifiable explanation of your mortgage arrears will also help your buy-to-let mortgage application.

Defaults

Your account goes into default when you don’t pay any bill. This happens with any type of account where you’ve agreed to pay a certain amount of money for some reason but end up not doing it. Defaults stay on your credit file for six years.

If you have defaults on your credit file and you’re looking for a buy-to-let mortgage, then lenders will look at how many you’ve had, when they were first registered and how much the default was for. Lenders will also take into consideration whether the defaults have been paid off and the amount of mortgage deposit you have.

IVA

An Individual voluntary arrangement (IVA) is an agreement you make with the people you owe to pay all or part of your debts. IVAs can make it harder to get a buy-to-let mortgage, but not impossible. Most mortgage lenders won’t accept your mortgage application if you have an outstanding IVA. But, there’s several specialist mortgage lenders who will consider your application once the IVA has been completed.

Your options will depend on a few factors. Lenders will look at if you’re currently in an IVA and when it happened. Lenders will also want to see that you made the repayments consistently and quickly throughout the time you had the IVA.

For most lenders when it comes to assessing the impact of your IVA, they will be concerned about how long ago it was set up and if you have any other credit issues.

Bankruptcy

It’s possible to get a buy-to-let mortgage if you’ve been discharged from bankruptcy. Bankruptcies are usually discharged after one year. This means you’re released from any debts covered by your bankruptcy and no longer under the restrictions imposed. Bankruptcy is a legal status which means when you can’t pay any of your debts.

It will be nigh on impossible to get a buy-to-let mortgage one year after being bankrupt but the longer it’s been since your discharge, more lenders will be prepared to look at your application.

Repossessions

Repossession is a very severe form of bad credit and will make it quite difficult to get a buy-to-let mortgage while this type of bad credit issue is registered on your credit file. A repossession will remain on your record for six years, after which time most mortgage lenders will consider your application.

There are some specialist lenders who may be willing to look at your application after three or four years. You would likely need to have a large deposit and the interest rates available may also be higher than for standard buy-to-let mortgages in order to offset the potential risk on the part of the mortgage lender.

County Court Judgments (CCJs)

CCJs happen when you owe money to someone and they take court action against you. You’ll get a CCJ if the court agrees with your creditor and, at this point, you’ll be instructed to repay the money either in one lump sum or in instalments.

It’s possible to get a buy-to-let mortgage with a CCJ. Lenders will look at the value of the CCJs, how many you have and how long ago they were registered and if the debt has been paid off. Some lenders will consider buy-to-let applicants with CCJs registered just a couple of months prior.

Debt Management Plans (DMPs)

A debt management plan (DMP) doesn’t have to be a permanent roadblock to getting a buy-to-let mortgage.

Most people who have a current DMP will also have other credit issues and lenders will need to take them into consideration too. If you’re currently in a DMP, you might have late payments, defaults and CCJs registered on your credit file. These could all affect your mortgage application, depending on their age and the amounts involved.

Which lenders are available for buy-to-let mortgages with bad credit?

There are several specialist mortgage lenders who will consider accepting buy-to-let applications from people who have bad credit. These lenders include (but are not limited to):

• The Mortgage Lender (TML)

• Vida Homeloans

• Aldermore

• Kensington Mortgages

• Buckinghamshire Building Society

If you have a bad credit score, it might be wiser to seek the help of a specialist mortgage lender rather than applying to a number of mainstream lenders. Specialist lenders will look at your buy-to-let application overall and consider all aspects of your case before reaching a decision.