Landlords with bad credit history may get mortgage help

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Landlords who want a mortgage to purchase buy-to-let property may soon be able to get a loan even if their credit history is poor, reported in October 2017.

Landlords with a bad credit score have limited options when it comes to loans. Some landlords have been bankrupt or had an Individual Voluntary Agreement (IVA) in place to pay creditors. After the bankruptcy or IVA period is over, it can take several years to build up a good credit rating in order to qualify for a loan.

A specialist lender is running a trial of short-term loans for people with a bad credit score. Loans can be taken out for periods of between one and three years and can be used to purchase buy-to-let properties. Interest rates are high at around 7% and the loan-to-value rate is between 70% and 75%. The idea is that borrowers are not locked into this high interest rates for many years. During the one to three years that they are repaying the loan, borrowers can start rebuilding their credit score, and by the end of the loan period, they could be eligible for a commercial mortgage at a lower interest rate.

These new loans are not yet widely available. The pilot scheme is trialling the concept before committing to their widespread use.

A commercial mortgage broker can advise people with a patchy credit score about their options and talk to specialist lenders about possible loans.

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