What are adverse credit buy to let mortgages?
Adverse credit buy to let mortgages are designed for borrowers who may have experienced financial difficulties in the past, resulting in adverse credit histories. These mortgages provide an opportunity for individuals who would typically struggle to secure conventional buy to let financing. Adverse credit may have occurred from late payments, defaults, or even bankruptcy.
What are the challenges with adverse credit buy to let mortgages?
Borrowers with adverse credit usually face challenges when applying for a mortgage. This is because there are a limited number of lenders that are willing to accept the risk. At Mercantile Trust, we understand that the past few years have been tough financially, with many individuals struggling to pay their bills and/or debts. We are specialists in lending to those with poor credit, so even if you’ve had issues such as defaults, CCJs or missed payments, we may be able to help.
Adverse credit buy to let mortgages often come with higher interest rates and fees compared to standard buy to let mortgages. Some lenders perceive borrowers with adverse credit as higher risk, leading to increased costs. Investors should carefully assess the investment to ensure the potential rental income justifies the higher costs associated with these mortgages. As a direct lender, there are no hidden broker fees (lender fees apply).
Overall, adverse credit buy to let mortgages provide an alternative financing avenue for individuals with adverse credit histories. While they offer opportunities to enter the buy to let market, borrowers must be aware of the challenges they may face. Higher interest rates, fees, and stricter eligibility criteria can impact the profitability of investments. Thorough assessment, expert advice, and long-term financial planning are key to successfully navigating the adverse buy to let mortgage landscape. By understanding the implications of these mortgages, investors can make informed decisions and strive for successful property investment endeavours.
Specialist buy to let mortgage lending
Whether you have never owned a property, or are an experienced buy to let landlord, you could invest with our truly flexible buy to let mortgage solutions.
We offer flexibility in ways other lenders can’t. Top slicing allows you to make up a rental shortfall with your own income, allowing you to borrow the amount you require, to purchase the buy to let property you want. We’re also able to use surplus rental income to top up loans.
You can borrow up to £500,000 on a buy to let mortgage with us. If you happen to be investing in a low value property, get lending on property values from just £60,000. What’s more, you can borrow from a loan size of just £10,000.
Secure a range of buy to let mortgage solutions, regardless of your experience as a landlord. Call us on 0800 023 3737 or complete our enquiry form below.
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How we could help
Unlike other buy to let mortgage lenders, we don’t take into account your credit score when calculating the amount you can borrow from us.
At Mercantile Trust, we like to do things differently. We take a holistic approach when reviewing your application and understand that not everything goes as planned.
We believe that having adverse credit shouldn’t stop you from being eligible for a buy to let mortgage or stop you pursuing your ambitions as a landlord. If you have adverse credit and are looking for a buy to let mortgage, call us free on 0800 032 3737. Alternatively, you can submit an enquiry form below or start a live chat with a member of the team.
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- We are a direct lender, no hidden broker fees
Tara Evans, Director of Operations
01923 280199
Frequently asked questions
A buy to let mortgage is a finance agreement that allows you to purchase a property in order to rent it to a third party.
A regular residential mortgage does not let you rent the property out, unless you gain the permission of your mortgage lender. Whilst residential lenders may give you permission if you ask for it, there will often be an additional charge to do so.
Buy to let mortgage affordability calculations are assessed on the potential rental income of the property i.e. how much rent can be charged for the house or flat / apartment being purchased. This means that your personal income is less of a factor.
The only exception is if you are a first time buyer, where personal income is assessed, in order to protect those who are new to property investment from over-stretching themselves financially.
Lenders will want to see that applicants do have some form of personal income, but many don’t have a minimum income requirement, so if you have retired and are on pension income, or you are self-employed and have a low income, or your personal income is low for any other reason, you may still be eligible for a buy to let loan.
When you speak to a buy to let mortgage lender direct, the process for getting a buy to let mortgage generally includes similar steps.
First of all, you would speak to a mortgage advisor for the lender, who will discuss how much you want to borrow, how much deposit you have to put down, and the rent you are receiving for the property (if you are remortgaging) or expect to receive (if you are purchasing).
The advisor will also ask you about the property in more detail, your experience in property (e.g. do you own your own home, do you own other properties), your financial situation and credit history.
This information helps a lender advisor assess whether you are a match with their criteria. Lenders build a picture of the type of property and applicant they are willing to lend to, this is their "criteria".
If your application matches the lender criteria, the property you are investing in will be valued and if the valuation matches the borrowing calculation for a deal the lender can offer you, they will grant you a "decision in principle" (DIP) or "agreement in principle" (AIP).
A DIP or an AIP simply means that if you proceed with an application and all other details you have provided meet the lenders approval, you will be offered a mortgage.
It is very important that all the information you provide is accurate, because if it isn't, the lender may be unable to accept your application.
There will be documents a lender requires from you to support your application, proof of affordability (e.g. tenancy agreement and proof of rent into a bank account), proof of your identification (if electronic checks fail) and signed lender documentation.
Once all the documents are back with the lender, the case will be processed and funds paid to you.
The amount of deposit you have available can have a significant impact on your mortgage.
The larger your buy to let mortgage deposit, the lower amount of credit you will need to borrow. If you borrow less money, your monthly payments and interest rates could be lower and the total amount you repay could be reduced.
The reason the cost or a mortgage is typically lower with a larger deposit, is because the lender takes on less of the risk than if they were lending to someone who wanted to borrow at a higher loan to value with a lower deposit.
The buy to let mortgage rate you are offered depends on a number of factors unique to your case. This includes your financial situation, the rental income of the property you’re looking to purchase, how much you’re expecting to borrow, your credit profile and whether you’re borrowing for a first or second charge mortgage.
Because of the amount of factors considered, buy to let mortgage rates can vary. Whilst you can input details about the borrowing you need into various online buy to let mortgage rate comparison tables, they usually cannot overlay the lender criteria, so you may be looking at a product you are not eligible for.
Having a discussion with a lender directly, will help you find out if you qualify for their products, and which product specifically from amongst their range.
Having a discussion with a broker, who has access to an extensive breadth of lenders, will help you establish the most competitive deal you can secure from across the buy to let marketplace.
If you want to raise some extra cash and release some equity from an existing mortgaged rental property, a second charge buy to let mortgage could be the ideal solution.
Whether you want to raise the money for a deposit for your next property, to renovate an existing property or for any other reason at all, a second charge buy to let mortgage is a great way to get the capital you need, fast.
A second charge mortgage sits alongside your existing buy to let mortgage product without affecting it. It is an alternative to remortgaging.
Always be prepared for times when there’s no rent coming in
In the life of any rental property, there will almost certainly be periods when there is no tenant and no rent is being received. It is essential to plan ahead for these times (known as “voids”) as you will still be required to make your mortgage repayments in order to retain the property.
During the times you are receiving rent, transfer some of it to a savings account and keep this account topped up whenever possible. This money can be used to make mortgage payments during voids, or to cover any unexpected repair bills such as blocked drains or a broken boiler.
Never rely on the sale of the property to repay its mortgage
Assuming that you will be able to sell a property in order to repay the mortgage can be a risky trap to fall into. Even in a buoyant economy there is always the danger of house prices dropping. If this was to happen, you may not be able to sell your property for as much as you anticipated, and you would still have to cover the difference on the outstanding mortgage.