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First time buyer buy to let

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By Pete Mugleston   Mortgage Advisor

Last updated: 25th September 2018

If you don’t yet own your own home, you may think getting a buy to let property is completely out of your reach. However, that’s not necessarily the case. It’s possible to purchase a buy to let even if you don’t own a home of your own and there are a handful of lenders catering for this.

That said, first time buyer buy to let is more complex than standard buy to let, so it’s important to seek expert help.

The specialists we work have plenty of experience of finding buy to let mortgages for first time buyers and can help you to realise your property dreams – even if you’ve no plans to live in the home you buy.

In this buy to let guide for beginners we’ll answer the most common questions from would-be buyers, including:

Can I get a buy to let mortgage as a first time buyer?

Many customers contact us to ask “can I get a buy to let mortgage without owning property already?” and the answer, for many borrowers, is yes – there are buy to let mortgages for non-homeowners.

1st time buyer buy to lets (FTB BTL) are certainly harder to come by, generally because lenders have an issue with risk when anyone wants a buy to let without a residential mortgage.

Additional income assessments for First time buyers

Back in the day when lenders assessed affordability for buy to let mortgages by rental income alone, some borrowers unable to afford their own residential mortgage abused this by living in the property themselves. These days lenders will verify personal income for buy to let mortgages without owning another property, to avoid this issue.

First time buyer BTL mortgages require borrowers to evidence their income and will calculate affordability based on this AND the rental yield of the property. To this end, most lenders will cap lending around 4x income, some will do up to 5x. So, for a first time buyer first time landlord, earning £30k, the max they could borrow would be between £120-150k, providing the rental income was also sufficient to cover the mortgage payments as per usual rental calculations.

Why would a first time buyer want to become a landlord before buying a home?

Why someone might take a buy to let as their first mortgage is the question many lenders will ask when deciding to lend. For many, it’s easy to see why someone might want one. Location is a big factor. Let’s say you have the cash to get on the property ladder but you have no chance of buying in the area you want or need to live in at the moment. Rather than miss the opportunity to invest in property altogether, you could buy a rental property to let out. Whatever the reason, lenders will want to agree with the justification.

Which lenders offer first time buyer buy to let?

The number of lenders who will offer mortgages to a buy to let first time buyer as their only property, who doesn’t own their own home is limited, so it’s essential that you speak with an expert who knows the sector. The advisors we work with have access to the whole of the market and can help you find the right provider for someone in your circumstances.

It’s also worth noting that while criteria requirements vary from lender to lender, on the whole these mortgages will require a larger deposit and will usually come with a higher rate. Furthermore, the lender will usually decide how much they’re willing to lend you based on how much you earn so essentially a minimum income will apply.

What will buy to let lenders look at?

When assessing applications for a buy to let mortgage for a first time buyer lenders will take a different approach than they would for a standard buy to let.

With the latter, the lender will be interested in rental potential. They’ll want to know that you can bring in enough cash through letting the property to easily cover the mortgage. (In recent years tighter regulation has seen the rental requirement ratio for most landlords increase).

As a first time buyer first time landlord, the lender will be more interested in your income and your ability to cover the payments if need be. You’ll be assessed in much the same way as you would be if you were taking out a residential mortgage.

As a FTB landlord you have no evidence that you can handle any kind of mortgage, so you’re seen as a bigger risk. As such you’ll need to provide more documentation and information up front. This could include…

  • A reference from your own landlord (if you rent)
  • A longer address history (the standard is three years)
  • Several wage slips
  • Up to six months’ bank statements

Who classes as a first time buyer for buy to let purchases?

Lender opinion is divided on this. Some say first time buyers are those who have never owned a home, others say if they have not owned one in the last 6 years, 2 years, or even someone who doesn’t currently own one.

Do you need a residential to get a BTL?

Here at OMA, customers often ask us “can I get a buy to let mortgage without a residential mortgage?” and once again, for some borrowers it’s a yes!

Some lenders distinguish between “home” and “property”, and stipulate that the borrower must have a main residence, where others just want them to own any property.

For some lenders then, it is therefore possible to own a number of buy to lets having never owned a residential property as an owner occupier.

Can I get a FTB BTL mortgage as a limited company?

It is possible to get a first time buy to let mortgage without owning a property if you buy through a limited company. However, this won’t increase your chances of getting an application accepted. In fact, it will reduce them. The lender will still want to underwrite the application as they would a residential mortgage. Therefore, you’ll need a lender that will lend to limited companies and to first time buyer landlords.

If you fall into both of these niche categories, whole-of-market access is essential to find the right lender. The advisors we work with have exactly that, so get in touch and an expert will help you find the right buy to let mortgage provider for someone in your situation.

What if I have poor credit?

As with any mortgage, when looking for a first time buyer buy to let mortgage your credit history will be taken into account. If you don’t have the best credit history, however, don’t worry. While your options may be somewhat limited, there are some specialist lenders on the market who would likely still accept your application.

The advisors we work with have access to mortgage providers who are more than happy to deal with customers with any of the following against their name…

  • No credit history
  • Low credit score
  • Late payments
  • Missed mortgage payments
  • Defaults
  • CCJ’s
  • IVA’s
  • Debt management Schemes
  • Repossessions
  • Bankruptcy
  • Payday Loans
  • and customers with multiple credit problems

If you have any of the above on your file, the mortgage provider may base their lending decision on the type of adverse credit you have (a missed phone bill payment is less severe than a recent bankruptcy) and how long it has been on your file (the older the better).

What other options do I have?

As most lenders view buy to let for first time buyers as more risky than standard buy to let, they may (as mentioned above) require a larger deposit than they’d charge experienced landlords. As such, you may find you can’t afford to buy the property, even though you could do if you were getting the same treatment as existing landlords.

However, that doesn’t mean you have to walk away from the purchase. You could consider buying the property with a parent or sibling. Buying a property on a ‘sole proprietor, joint borrower’ basis will mean the buy to let is purchased in your name but both you and another person who owns a property (a parent or family member, for example) are responsible for the mortgage. As the property is only in your name your joint buyer won’t have to pay the 3% Stamp Duty surcharge.

Can I buy and live in it?

No. If you take out a buy to let mortgage for first time buyer but then live in the property you will be breaking the terms of your mortgage.

What happens when I want to buy a house to live in?

If your first property is a buy to let, this may have some implications when you come to buy a home to live in.

Firstly, you’ll have to pay the 3% Stamp Duty surcharge (unless you sell the buy to let before buying a residential property.)

The lender on your residential mortgage may also take into account the buy to let property and any debt associated with it when assessing your affordability.

Our experts can guide you through the mortgage maze to find the right solution for you.

Speak to a buy to let mortgage expert

If you like anything in this article or you’d like to know more, call Online Mortgage Advisor today on 0800 304 7880 or make an enquiry here.

Then sit back and let us do all the hard work in finding the buy to let lender with the right expertise for somebody with your personal circumstances. We don’t charge a fee and there’s absolutely no obligation or marks on your credit rating.

Updated: 25th September 2018
OnlineMortgageAdvisor 2018 ©

FCA disclaimer

The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage.

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