Buy to let for people with debts

31 October 2007
With mortgage lending at a seven year low, first time buyers becoming few and far between, crisis in the buy to let sector and predictions for a housing market crash, the affects of the sub prime crisis in the US and the Northern Rock debacle are still being felt.

Lenders are tightening their criteria, and the pinch is particularly being felt by people with bad credit histories, many of whom are finding it harder or even impossible to get loan approval. But despite all this, it appears there are still many lenders that are prepared to invest their money in high risk borrowers and a market they should be steering clear of.

The ‘sub-prime buy to let market’ is where people with bad credit histories are lent money in order to become landlords, which, given the current climate, seems like a crazy venture.

Nevertheless, there are more than 200 such deals on the market, and it is not just specialist lenders either – some of the mortgage industries biggest names, including Nationwide and Alliance and Leicester– are cashing in on this bizarre niche.

Kensington Mortgages is a specialist adverse credit company that provides a range of flexible mortgage solutions for those with a less than perfect credit history, and currently offers a number of sub-prime buy to let deals, up to a maximum of 75% LTV.

Spokesman Alex Hammond explains why people with adverse credit histories should be considered at individually and not lumped into one ‘steer clear’ bracket.

“Borrowers can receive an adverse credit history for a number of reasons including divorce, redundancy or illness, which could happen to anyone,” he said.

“Many people are able to get back on their financial feet relatively quickly but have a lasting record on their credit record. Just because a borrower has experienced difficulty in the past, they are not necessarily excluded from the potential benefits of investment in residential property if the mortgage is deemed responsible lending,” he said.

Mr Hammond says although sub-prime buy to let may sound like a risky business, Kensington has a very stringent lending process in place to minimise risk.

He said: “By noting a customer’s previous credit history but making responsible lending decisions on their future ability to pay, and by sensibly pricing for risk, experienced specialist lenders are able to provide an option for a section of customers who have a significant deposit and the excess income to service a buy to let investment but are rejected by some financial institutions because of circumstances that have happened in their past.”

Find out more about Kensington Mortgages , adverse credit mortgages and buy to let mortgages

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