December 5, 2023 3:18 pm

Insert Lead Generation
Nikka Sulton

Though lenders typically favor experienced landlords and property owners, securing a buy-to-let mortgage as a first-time buyer is feasible. It’s a viable option to enter the property market, particularly if you currently reside rent-free, for instance, in your parent’s home or employer-provided accommodation.


Can A First-time Buyer Get A Buy To Let Mortgage?

Certainly, but as a first-time buyer venturing into the property market for investment purposes, you’ll face additional challenges. Buy-to-let mortgages, tailored for property investment, cater to those not seeking residence. Being a first-time buyer means you lack a proven homeowner or landlord track record, presenting a higher risk to lenders. This might result in difficulty securing desired terms or affordability. Many providers, if they cater to first-time buyers at all, typically:

  1. Require a larger-than-average deposit.
  2. Apply higher interest rates.
  3. Demand a higher projected rental income to cover repayments.

Factors like age, credit score, employment type, and income also influence the lending process.


Should first-time buyers invest in buy to let? 

Entering the property market as a first-time buyer through the buy-to-let route holds practical advantages:


  1. Strategic Investment Beyond Local Affordability:

   If purchasing within your current area seems financially challenging, exploring property investments in other regions while continuing to rent locally provides an alternative entry onto the property ladder.


  1. Long-Term Stability of Real Estate Investment:

   Real estate remains a relatively stable and secure long-term investment. While property values may fluctuate, historical trends indicate a general increase over time, making it an attractive option for prospective investors.


  1. Income Potential and Profit Margins:

   The rental income from a buy-to-let property can serve as a substantial income stream. Leveraging a lower buy-to-let mortgage rate enhances the potential profit margin, making it an appealing option for those looking to build a property portfolio.


  1. Meeting Rental Demand:

   In a market where many individuals cannot afford to purchase homes, the demand for rental properties remains high. Becoming a landlord presents an opportunity to fulfill this demand and generate income through renting.

However, it’s crucial to be aware of the potential challenges that come with being a landlord. Seeking advice from an expert mortgage broker specializing in buy-to-let properties can significantly alleviate the stress associated with navigating this process. Their insights and guidance can help you make informed decisions and navigate potential pitfalls effectively.


What criteria will I need for a buy to let mortgage?

Buy-to-let mortgage lenders have diverse criteria, but for first-time buyers, meeting specific requirements is essential:


  1. Minimum 25% deposit.
  2. Satisfactory income and affordability verification.
  3. Employment verification.
  4. Minimum age requirement, typically 21 or 25 with some lenders.
  5. Consideration of credit history.


What documents will I need to apply?

As a first-time buyer, lenders scrutinize your application more thoroughly. Providing ample supporting documentation is crucial for a successful application. Typically, lenders request:

  1. 3-6 months’ wage slips or accounts (for self-employed individuals).
  2. Employment contract verification, especially for new job positions.
  3. Address history documentation, such as utility bills, tenancy agreements, or bank statements.
  4. 3-6 months’ bank statements.
  5. Landlord reference if you’ve rented in the past year.

Additionally, evidence of potential rental income is necessary. An ARLA-qualified letting agent’s or a qualified surveyor’s valuation suffices. Lenders require this as your rental income should be 125-140% of your mortgage, depending on the lender’s specific criteria.


Should I get an interest-only or repayment mortgage?

Many landlords prefer interest-only mortgages over repayment mortgages due to their lower monthly payments. With interest-only, you pay only the loan interest, making it more cost-effective than repayment mortgages, where both the loan and interest contribute to higher monthly expenses.

While a repayment mortgage results in full property ownership once repaid, the elevated monthly payments reduce potential rental profits. As a first-time buyer, both buy-to-let mortgage types are accessible. The choice between them hinges on your specific investment objectives.


Buy to let mortgage rates for first-time buyers

First-time buyer mortgages typically feature lower Loan-to-Value ratios (LTV) compared to buy-to-let mortgages. Residential mortgages can go up to 95% LTV, while buy-to-let mortgages usually start at 75% LTV. This substantial difference adds to the ease of becoming a homeowner compared to a landlord.

Choosing between a buy-to-let and a residential mortgage requires careful consideration of cost variations and structural differences. While it’s possible to secure an interest-only mortgage for a residential property, such options are limited, as not many lenders provide them.


How much deposit will I need?

Most buy-to-let mortgage lenders mandate a minimum 25% deposit. As a first-time buyer seeking a buy-to-let mortgage, your deposit may be higher, although exceptions exist.


How much can I borrow?

Lenders evaluate affordability for buy-to-let mortgages differently than residential mortgages. Underwriters prioritize the potential rental income from the property, a key factor influencing mortgage approval. While factors like credit scores play a role, the emphasis on projected rental income remains a significant determinant in the approval process.



More Property Blogs HERE: 

Can you make money investing in property?

Section 24 Effect on BTL Property

How do you calculate BRRRR?

How do I start a property rental business in the UK?

How to add value to your rental property

What are the requirements for a HMO UK?

How to convert a property into an HMO in 2023

Is refinancing the same as restructuring?

What is Refinancing? How does it Work?

BRR Property Deals: Buy Refurb Refinance in the UK

Should You Give Up on Buy-to-let?

A Guide to Section 24 Tax Change For Buy-to-Let Investors

Do I need a Licence to rent out my property UK?

Property Investing Strategies Using BRRR

What is the criteria for HMO in the UK?

{"email":"Email address invalid","url":"Website address invalid","required":"Required field missing"}