Buy to let mortgages are of course, the backbone of landlord house purchase funding, and in recent decades this market has expanded immeasurably. Within the last year, buy to let lending has topped £5bn.
But how does your credit score affect your ability to get a buy to let mortgage, and why is it important to check your credit score before applying for one of these home loans?
Given the risks of void periods and tenants defaulting on the rent, the rates on buy to let mortgages tend to be higher, typically by up to 1.5%. Equally, you generally have to put down a higher deposit than you would with a standard mortgage, usually of around 25%.
In most cases, you will also need to already be the owner of your home, while some lenders also have a minimum income threshold, meaning you could struggle to get a buy to let loan if you earn less than, say, £25,000.
Landlords and landlords-to-be should certainly shop around for the best rates. But never be tempted to choose a conventional mortgage and then rent the property out, since by this effectively is mortgage fraud.
With more potential restrictions on buy-to-let lending, it’s even more important that you give yourself the best chance of being accepted by checking your credit score before submitting the mortgage application.
How credit score affects buy to let mortgages
A less than brilliant credit score doesn’t have to mean the end to your dreams of becoming a buy to let landlord or landlady, although it can make things harder.
Luckily, there are lenders who are willing to help applicants who may have been refused elsewhere.
But what can make things seem rather unfair is that even if you have a good income and the necessary deposit in place, a poor credit score can lead to your application being turned down.
Particularly with landlord home loans, lenders will check credit reports to assess whether would-be mortgage customers have previously default on any debt commitments.
At the same time, prospective lenders will also be checking out for any County Court Judgements (CCJs) incurred against your name, and look to see whether you have ever had to file for bankruptcy.
Even if problems happened some time ago, you could still find your application not being accepted.
You may find you need to take out your loan with a specialist lender offering what are known as “adverse credit” mortgages and, unfortunately, may well end up paying more for the privilege.
Checking your credit history
Before you apply for any buy to let home loan, check your credit score with care to see whether there is anything that could lead to your mortgage application being rejected.
Reasons could include simple oversights that are easy to put right, from not being on the electoral roll to not closing down unused credit card accounts.
You will be able to see your credit history via a major credit rating agency such as Experian, the world’s leading information services company.