Buy to Let For First Time Buyers

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Can a First Time Buyer Get a Buy to Let Mortgage?

Yes, there are many mortgage lenders accepting buy to let mortgages for first-time buyers, but only under certain circumstances and the pool of lenders is smaller than if you already owned a property.

Finding the right mortgage lender from the start saves time and money. Applying with lenders that aren’t suitable can result in you being declined, which can also damage your credit score.

Is Getting a Buy to Let Mortgage as a First Time Buyer Hard?

Not every lender will accept first-time buyers, as some will only offer buy to let mortgages to existing homeowners. Mortgage lenders will view you as high-risk, as you’ve yet to own a property and they will have concerns you may end up living in the property.

Typically, a first-time buyer will purchase their own home before becoming a landlord. Once you’ve got your first mortgage, getting a buy to let mortgage can become easier. Therefore obtaining a buy to let mortgage on your own can be harder to obtain without assistance.

Some buy to let lenders will accept first time buyers provided they are doing a joint application with somebody who is a homeowner already. So if you are in a position where you are purchasing with somebody in this position it will open up the amount of lenders available to you.

Why Would a First Time Buyer Want a Buy to Let Mortgage?

You may not need a residential mortgage as you perhaps live with your parents or a partner. You may have inherited a buy to let property and now want to grow your portfolio. No matter what the reason, investing in a buy to let property can provide you with a monthly income.

Purchasing a buy to let property can be a great investment, but you need to make sure you do your research to make sure you make no mistakes. Depending on your tax status it could be more beneficial to purchase the property in a limited company rather than your personal name. Finding out the best way forward can save you time and maximise your profits.

How Much Deposit Will I Need?

The majority of buy to let mortgage lenders require borrowers to have at least a 25% deposit. You may find a mortgage lender willing to accept 20% deposit, but this is more rare.

How Much Can I Borrow?

There are two main factors which determine how much you can borrow on a buy to let mortgage.

Firstly you need to consider loan to value, most lenders will require at the least a 25% deposit. Some lenders may allow you to proceed with a 20% deposit. This means the amount you can borrow is restricted by the property value.

Secondly you need to pass affordability. Mortgage lenders consider the projected rental income and will apply this to their stressed income coverage ratio test (SICR). The figures used in this test to establish borrowing capacity depend on your tax status. Provided the rental income covers the proposed mortgage payments you will be able to lend the borrowing amount requested.

What Criteria Do I Need to Pass For a First Time Buyer Buy to Let Mortgage?

Buy to let mortgage lenders each have varied criteria. If you are a first time buyer there are some standard criteria you will need to pass:

  • 20-25% deposit minimum
  • Meet a minimum income (around £20,000-£25,000)
  • Affordability assessment
  • Minimum age of 21 or 25 with other lenders
  • Good credit history

Each individual may have some other specific criteria they would want you to pass, however the above points are the main areas we see across all mortgage lenders that you will need to pass. 

Speak to an Expert!

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Contact us today for expert advice and guidance on your unique mortgage and property needs. We will work with you on a one-on-one to basis to help you find the right solution for your needs.  

With our experience you can rest assured that you are in good hands when it comes to securing the financing you need for your property.

first time buyer buy to let mortgage. Switch Mortgage finance fareham and whiteley

What Documents Will I Need to Apply?

As a first time buyer you will be scrutinized by the mortgage lender to ensure they are happy to lend to you. Lenders will want to know you can afford to purchase the buy to let property and establish you are serious about owning one.

Lenders will often request the following documents:

  • Proof of Identification
  • 3 months’ payslips (employed)
  • Self Assessment Forms (Self employed)
  • Address Verification
  • 3 months’ bank statements
  • Assured shorthold tenancy Agreement (AST) if the property is already rented
  • Evidence of the potential rental income carried out by an ARLA-qualified letting agent or a qualified surveyor if the property is not currently rented.

Mortgage lenders may ask for further documentation, however the above list is mandatory documents which will be required.

Should I Get an Interest Only or Repayment Mortgage?

Most landlords choose interest-only mortgages in comparison to repayment mortgages. The mortgage payments for interest-only are low in contrast to repayment mortgages, as you’d only pay interest on the loan. This can maximise your profits and borrowing potential.

With a repayment mortgage, you’d repay the loan in addition to the interest, resulting in a higher cost each month. The main advantage of having a repayment mortgage is that you’d own the property outright once the mortgage has been fully repaid. The drawback of this is that monthly mortgage payments are higher which limits your rental profits and males the affordability test harder to pass.

What if I Have Bad Credit?

If you have bad credit, getting a buy to let mortgage as a first-time buyer will be very difficult. However there are specialist lenders that may accept you. You may be required to put down a deposit higher than 25% and you may find the interest rates offered will be higher.

Some lenders won’t accept you at all depending on your credit issues, whereas others will be better suited. As a first-time buyer, you don’t want to risk damaging your credit score further, so applying with a suitable lender first time is important. A mortgage broker will have the experience to recommend the correct lender in this scenario for you.

Do I Have to Pay Stamp Duty Tax on a Buy to Let Property as a First Time Buyer?

There is a discount for first time residential buyers, but you will not be entitled to this if you are buying for the purpose of letting. If you’re purchasing your first buy to let property, then there is no discount.

Can I Live in My Buy to Let Property?

No, if you plan to live in a property that you purchase, you will need a standard residential mortgage rather than a buy to let mortgage. This is because buy to let mortgages are specifically designed for the purpose of letting out the property to tenants, not for owner-occupiers.

Why Choose a Mortgage Broker?

While it’s true that most buy to let lenders typically require new customers to already own a property, it is still possible to obtain a first time buyer buy to let mortgage under certain circumstances.

As a first-time buyer, you’ll need a careful approach to applying for a buy to let mortgage. For this reason, we’d highly recommend having an advisor on board. Our specialists can find you a suitable lender and clarify anything you don’t quite understand.