Limited Company Mortgage Bad Credit
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Limited Company Mortgage Bad Credit
Paul Holland explains how to get a mortgage through a limited company if you have bad credit.
Can I get a mortgage through my limited company if I have bad credit? How does having bad credit affect my ability to get a mortgage?
Bad credit, to any degree, will have some impact on a mortgage application. It just depends on the severity of it. The likelihood is you’ll end up with a slightly higher rate than if you had good credit.
That goes hand in hand with potentially higher fees, due to the additional work a broker puts in, or from the lender viewing you as a higher risk customer. The terms could potentially be less favourable, depending on the severity of the bad credit.
What is considered bad credit in the UK?
I would class bad credit as a combination of adverse events across multiple different accounts, that has progressed at least to default stage.
A default comes about when you’ve missed six or more consecutive payments. That will be noted on your credit file. When it progresses further you could find yourself in an individual voluntary agreement (IVA) or a debt management plan (DMP).
You could receive a County Court Judgement (CCJ), if it’s gone as far as the courts. Those three things are definitely examples of bad credit. Defaults also fall into that category.
Further down the line, maybe you’ve had a property repossessed or had to file for bankruptcy. Those things also come under that bad credit heading.
Impaired credit is a less severe situation, where you’ve struggled to keep up with an agreement with a lender. You may have missed payments or had multiple late payments consecutively. That’s going to have an impact on your score, but I wouldn’t necessarily call it bad credit.
Are there specific lenders who specialise in mortgages via limited companies with bad credit?
The pool of lenders that deal with limited companies is already reduced. It’s probably a third of the lenders we use. We’ve got access to everybody, so we have a good cross-section of lenders at your disposal.
Out of those, a further reduced number of lenders deal with bad credit. You are definitely looking at a smaller pool – even just a handful for a limited company mortgage with bad credit. It will probably mean paying a slightly higher rate.
Certain lenders are good with specific types of bad credit. If you have defaults, we might choose one lender, and a different one for someone with a CCJ or a debt management plan.
It’s a case of looking at the whole picture and marrying up all the criteria. Then we can approach the right lender for the best chance of a positive outcome.
Can I still get a mortgage through my limited company if I’ve had a previous bankruptcy or repossession?
It’s going to depend on the time that’s elapsed since those things were registered or discharged. It’s registered when it’s put on the account. When you’ve cleared that debt by keeping up with the agreement, you’re discharged.
Some lenders start their timeframe based on the point it’s registered. Others start from when you were discharged. Repossession and bankruptcy are probably the most severe credit issues. Lenders generally start to come back into the market at the three year point – either three years since you were registered, or three years since you were discharged.
Even if you are six years from discharge of bankruptcy, if you haven’t made the improvements an underwriter would expect, it could still fall down. The key takeaway here is make sure the rest of your financial conduct is as clean as possible. That gives you the best chance of a positive outcome.
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What if I’ve been declined for a mortgage through my limited company with bad credit previously?
With bad credit, it always comes down to the underwriter’s discretion. First they will see if your scenario meets their criteria – whether that’s a default, CCJ, missed or late payments. That’s a clear way to see whether you’ll be approved.
A good broker will know if your particular case will fit with a lender before they submit it. We will have done that legwork. Once you get through the criteria, the lender looks at credit score.
The score on your credit report isn’t necessarily the score that they’re looking for. They often have an internal scorecard, which is a combination of factors. On top of that, they consider your justification – the reason why you were in that bad credit situation in the first place – and your conduct since that time.
If you’ve had a mortgage declined, one or more of those factors hasn’t stacked up for the lender. It’s quite layered and complex. A broker with experience in this area will narrow it down to the right lenders for your situation.
What if I’m a First Time Buyer and have bad credit? Will this affect me getting a mortgage through a limited company?
Having a limited company reduces the pool of lenders, and bad credit reduces it even further. Then you’re throwing First Time Buyer into the mix, and that doubles up with a first-time landlord. If you haven’t owned a property before, obviously you haven’t been a landlord.
Buying property through a limited company is an investment and will come under a business model. The underwriter is going to be looking at your experience and the likelihood of you making this business a success.
With bad credit, there’s a really complex list of criteria to marry up. But it isn’t an absolute deal breaker. It’s possible, but the rate you’ll pay is certainly going to be more specialist – we will need to approach the ‘subprime’ sector of the market.
The ‘prime’ lenders are those on the high street – the most competitive. Having some complications in your case will make rates a bit more expensive. Then there’s subprime, for cases with lots of complications – which offer the highest rates available.
Can you remortgage via a limited company with bad credit?
The same rules apply for a remortgage as for a purchase via a limited company. If you are remortgaging, you’ve already got a mortgage. You may have secured a lender based on your bad credit – and it might have improved since you took the last mortgage.
On the other hand, your credit may have got worse since you took out that mortgage. If things have improved or are the same, you should have plenty of remortgage options.
If it’s got worse, it’s unlikely you can remortgage to a new lender. You may be better off doing a ‘product switch’. At the end of your existing deal, we can go to the lender you’re with and ask them for a new deal going forward – another two or five year fix, or whatever suits you at the time.
If your situation has improved, there’s a good chance we can secure a better rate for you. You can remortgage to a new lender and secure better terms as a lower credit risk.
Can I get a Buy to Let mortgage via a limited company with bad credit?
Getting a mortgage via a limited company always means it will be an investment property. Whichever way you look at it, it’s going to be a business move. It can’t be for personal occupancy. You can’t get a residential mortgage with a limited company.
All the things we’ve discussed up until this point are based on an investment mortgage. It’s going to depend on the severity of your credit, and you will probably pay higher rates than with good credit.
How can a mortgage broker help here? Is there anything else we need to consider?
As you can gauge from the questions we’ve gone through, this is one of the more complex combinations of criteria. We’re looking at limited companies, bad credit and potentially First Time Buyers.
With this scenario you’re going to be working with a reduced number of lenders, who won’t be accessible on the high street. It would be very difficult for you to wade through the complexities of this online.
In all honesty, it’s even difficult for a firm like ours, with such complex criteria. You need to find an experienced broker – both in Buy to Let and also with limited companies. We’ll need to look to do a lot of things before we place the business.
So certainly look at a specialist broker. Be open-minded around spending more time to obtain this type of mortgage than on a conventional basis.
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME.
YOU MAY HAVE TO PAY AN EARLY REPAYMENT CHARGE TO YOUR EXISTING LENDER IF YOU REMORTGAGE.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.
THE FINANCIAL CONDUCT AUTHORITY DOES NOT REGULATE MOST BUY TO LET MORTGAGES.
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