Can You Get a Buy-to-Let Mortgage with Bad Credit?
If you are considering investing in property and want to rent it out, a buy-to-let mortgage with bad credit is something you may be asking about. A buy-to-let mortgage is a type of finance arranged to purchase property that will be rented to tenants. In the UK, lenders assess these applications with a focus on rental income potential, credit history, affordability and other factors.
This article explains how buy-to-let mortgages work, how adverse credit can affect applications, what lenders typically consider, and the general routes some applicants take when credit records are less than ideal. The content is intended to provide general information only and does not constitute regulated mortgage advice.
What Is a Buy-to-Let Mortgage?
A buy-to-let mortgage is designed for people or businesses planning to purchase property to let it out to tenants. This is different from a residential mortgage, which is for someone’s primary residence.
Key characteristics of a buy-to-let mortgage include:
- Rental income focus – Lenders often assess the potential rental income the property could generate to help determine how much you may be able to borrow.
- Deposit requirements – Buy-to-let mortgages typically require larger deposits than residential mortgages. A common deposit might be 25% or more of the property’s value, though this can vary by lender and product.
- Interest rates and fees – Interest rates and associated costs may differ from residential products, and may vary significantly between lenders.
Lenders use both the expected rental income and the borrower’s financial profile when reviewing applications.
What Does “Bad Credit” Mean?
“Bad credit” is not a single definition with a universal threshold, but it usually refers to elements within a credit report that lenders view as higher risk. Examples include:
- Missed or late payments
- Defaults or arrears
- County Court Judgments (CCJs)
- Bankruptcies or insolvency history
- High levels of other debt
- Frequent recent credit applications
Different lenders have varying tolerance levels for adverse credit, and the impact of specific credit events often depends on how recent they are, how significant they were, and whether the behaviour has improved since.
Can You Get a Buy-to-Let Mortgage with Bad Credit?
In general terms, it may be possible to obtain a buy-to-let mortgage with bad credit, but there are several factors that can influence whether lenders are willing to consider an application:
Lender Criteria Vary
Some lenders specialise in cases where the credit record includes past issues, while others apply stricter criteria and may decline applications if certain markers appear on a credit report.
Type and Severity of Credit Issues
A single late payment from several years ago is usually viewed differently to recent defaults or multiple CCJs. The more recent and more numerous the adverse entries, the more lenders may see the application as higher risk.
Time Since Adverse Events
Many lenders are more comfortable when negative information is older and evidence of more recent responsible financial behaviour exists. For example, a missed payment five years ago is often seen less critically than one in the last six months.
Deposit Size and Rental Coverage
Lenders may look more favourably at applications where there is a significant deposit and where rental coverage tests (the ratio of expected rent to mortgage payments) are comfortably met.
Experience With Letting
Some lenders may consider applications more favourably if the applicant has a track record of managing rental properties successfully.
How Lenders Assess Buy-to-Let Mortgage Applications
When assessing a buy-to-let mortgage, most lenders typically consider the following:
Rental Income versus Mortgage Payments
Lenders usually apply a rental coverage test to ensure the expected rent will sufficiently cover the mortgage payments. A common benchmark might be that the expected rent must be at least 125% to 145% of the mortgage interest cost, but specific criteria vary by lender and product.
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Credit History
Credit references are obtained from credit reference agencies to show credit behaviour over time. The presence of late payments, defaults, CCJs or recent financial stress can lead to higher risk assessments.
Deposit and Loan-to-Value (LTV)
A larger deposit reduces the lender’s exposure and may increase the number of products available. Lower LTV options typically involve more competitive rates and may be easier to secure than higher LTV options.
Personal Financial Position
While rental income is important, many lenders also review personal finances, especially if the applicant has limited experience or other sources of income. This can include employment status, other financial commitments, and overall stability.
What Challenges Might You Face?
Limited Lender Options
Not all lenders are willing to consider buy-to-let mortgage applications from individuals with adverse credit. Specialist lenders or those with more flexible underwriting criteria may be more appropriate in some cases.
Higher Costs
Where a lender is willing to offer a product, the interest rate or fees may be higher to reflect the perceived increased risk.
Greater Scrutiny
Lenders may ask for more supporting information or documentation where the credit record includes issues. This could include explanations for past payment problems and evidence of improved financial management.
Steps That May Be Relevant Before Applying
Although each case is unique and lender criteria vary, there are some general elements that applicants often consider when preparing for a buy-to-let mortgage application:
Review Your Credit Report
Checking your credit report with major credit reference agencies can help you understand what lenders will typically see. If you identify errors, you may be able to raise these with the agency concerned.
Consider Timing
Where credit issues are recent, allowing some time with positive financial behaviour before applying can sometimes help. Time can lessen the impact of historical adverse information.
Plan for Deposit and Rental Coverage
Assessing how much deposit you may be able to contribute and how the expected rental income compares to mortgage costs can help identify which products might be feasible.
Understand Different Lender Types
Some lenders specialise in cases that fall outside mainstream criteria. Speaking with a broker or introducer (who can provide general information) may help you understand the range of options available in the market.
Common Misconceptions
There are a few common misconceptions when it comes to bad credit and buy-to-let mortgages:
“Bad Credit Means No Mortgage Ever”
Not all credit issues lead to automatic declines. Lenders consider context, severity, and recency. Some applicants with historical issues have successfully secured mortgages.
“All Lenders Treat Credit the Same”
Different lenders have different risk appetites. Some are more conservative, others more flexible, and product availability changes over time.
“Larger Deposits Always Offset Bad Credit”
While larger deposits can make an application more attractive, they do not guarantee approval if other criteria are not met. Lenders consider multiple factors, not just the deposit size.
Alternative Routes to Consider
If your credit record has adverse markers, there are routes some applicants explore, depending on eligibility and lender criteria:
Specialist Buy-to-Let Lenders
Some lenders focus on non-standard credit cases and may have more flexible underwriting criteria. These products may carry higher costs or stricter conditions.
Joint Applications
Occasionally, applicants apply with a partner or family member whose credit profile may strengthen the overall application. This does not guarantee approval, and the financial responsibilities should be fully understood.
Waiting and Strengthening Your Profile
For some people, allowing time to pass while demonstrating consistent, positive financial behaviour can improve credit report patterns and widen lender options later.
What Lenders Do Not Typically Consider
It is important to note that lenders generally do not base decisions solely on one aspect such as credit score. Instead, they look at the overall pattern of financial behaviour, current financial commitments, and other risk factors. Nor do lenders base decisions on a single metric — such as the presence of a missed payment without considering context or the length of time since it occurred.
Summary
Securing a buy-to-let mortgage with bad credit is not universally impossible, but it is typically more challenging than if your credit history is strong. Lenders may have different criteria, and elements such as the nature of credit issues, the size of the deposit, future rental income, and overall financial profile all play a part in how applications are considered.
Where credit records contain adverse information, specialist lender criteria and different underwriting approaches may be relevant. Understanding the general factors lenders consider and what might be involved can help you prepare and identify potential approaches.
This article provides general information only. For personalised guidance, regulated mortgage advice is required.
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Important information: Mortgage Bridge provides information only and acts as a mortgage introducer. We do not provide mortgage advice or make lender recommendations. We can introduce you to an FCA-regulated mortgage adviser who can provide personalised mortgage advice.