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First-Time Buyer Buy-to-Let Mortgages

As a first time buyer, see how expert guidance could help secure your Buy-To-Let mortgage approval

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Pete Mugleston

Author: Pete Mugleston - Mortgage Advisor, MD

Updated: April 26, 2022

If you’re looking for a buy to let (BTL) mortgage and you are a first time buyer, the process typically differs compared with applicants who currently – or previously – own property, though getting one is definitely possible.

In this article, we take an in-depth look at how first-time buyers can secure a buy-to-let mortgage, what you’ll need to include in your mortgage application, and how you can find the best deals.

Once you read through the details below, if you’d like to know more about the process involved with buy to let mortgages for first time buyers, get in touch on 0808 189 2301 or make an enquiry and we’ll arrange for an advisor we work with to get in touch.

Can a first-time buyer get a buy-to-let mortgage?

Yes, though mortgage lenders typically view this type of loan as higher risk since you may lack experience being a landlord. There could also be a shortfall of funds if the property was empty. Because of the risk, many mortgage lenders may ask you to put down a larger deposit or expect the rental yield to be higher.

However, this doesn’t mean that every lender will expect a first-time buyer to pay more for their mortgage.

What’s the criteria for a buy-to-let mortgage?

As a first-time buyer you may find you have fewer mortgage providers willing to lend to you for a buy-to-let property. However, don’t despair. There are a number of providers who will consider applications from investors who don’t already own their home.

The criteria will vary from lender-to-lender, though many mortgage lenders will expect borrowers to meet their eligibility criteria for the following:

  • Larger deposit (minimum is often 25% of the
    property’s value)
  • Income/affordability
  • Age of the borrower
  • Credit rating
  • Employment type

For more information on how to meet the criteria, read our buy to let mortgage guide.

Paying back your mortgage

The majority of buy to let (BTL) mortgages are interest-only. You will need to ensure you are able to repay the full loan at the end of your mortgage term with an appropriate repayment vehicle. Mortgage lenders will want to know how you intend to repay the loan when you make your application.

Some lenders offer repayment buy-to-let mortgages and if this is more appropriate for you, the experts we work with will help you find a provider who can cater to these requirements.

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How will a mortgage lender assess my application?

When considering applications, lenders will take a different approach than they would for a standard buy-to-let.

The lender will be interested in the rental potential. They’ll want to know that you can bring in enough cash through letting the property to easily cover the mortgage.

As a first-time buyer who is also a 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.

What documents will I need to provide with my application?

Because you have no previous history of any kind of mortgage lending, you may be viewed as a bigger risk. As such, you’ll need to provide more documentation and information upfront.

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

Lenders will also need evidence that the predicted monthly rental income will be a certain percentage higher than your mortgage payments. For standard buy-to-let applications, this is around 125%, though as a first-time buyer, you could be expected to meet 145%.

For example, if you had a £500 buy-to-let mortgage as a first-time buyer, your lender would expect to see a rental income of £725.

While there are typically less mortgage lenders willing to provide buy-to-let loans to first-time buyers compared with standard applicants, this doesn’t mean that you can’t find a great deal.

The independent mortgage advisors we work with have whole-of-market access, meaning that they can look and compare the affordability and eligibility criteria of each mortgage lender to find a deal that suits you.

How is my income used to calculate my affordability?

In order to provide an initial snapshot of how much they may be willing to lend, a mortgage provider will use a multiple of your income. Most lenders will use 4 or 4.5 x your annual income, however some may consider using 5 x your annual income.

For example, a first-time buyer who is also a first-time landlord earning £30k per year could potentially borrow between £120-150k, providing the rental income was also enough to cover the mortgage payments as per usual rental calculations.

Historically, mortgage lenders assessed affordability for buy-to-let mortgages based purely on rental income alone, however, some borrowers were unable to afford their own residential mortgage and abused this by living in the property themselves. Now, lenders will verify personal income for buy-to-let mortgage applicants who do not own another property to avoid this issue.

How much deposit will I need to put down?

The minimum deposit amount is usually 15% for a standard buy-to-let mortgage, though some lenders may expect more if you’re a first-time applicant to offset the risk. As such, you may find you can’t afford to buy the property, even though you could do if you were offered the same terms as existing landlords.

However, if you’re worried about meeting the deposit requirements, you may be able to get a guarantor or a sole proprietor, joint borrower mortgage, which we talk about below.

What mortgage options are available to me?

If you’re unsure whether you can meet the affordability requirements for a buy-to-let mortgage, as a first-time buyer you do have a number of options which could boost your application. These include:

Guarantor mortgage

You can use a guarantor if you need assistance getting your buy-to-let mortgage. Because a guarantor agrees to meet any mortgage payments that the borrower misses, some mortgage lenders may be willing to offer lower deposit terms because they feel that the risk has been offset.

Guarantors are required to feature on the title deeds, though they will not own a share of your property.

Joint borrower, sole proprietor mortgage

joint borrower, sole proprietor mortgage allows you to purchase a buy-to-let in your name only, though both you and another person who owns their own property (such as a parent or family member) are responsible for the mortgage.

What if I have bad credit?

Regardless of whether you’re a first time buyer or not, all lenders will want to review your credit history as part of the application process for a buy to let mortgage. If you have poor credit, however, don’t panic!

While your options may be somewhat limited, there are a number of bad credit mortgage lenders who will still consider your application.

Each lender’s view on the specific details of any adverse credit history and whether they would be prepared to accept your application, as a result, will vary depending upon the severity (anything ranging from late payments to repossessions or bankruptcy could be considered), when this was recorded and whether it is settled or not.

Most lenders will overlook minor things such as missed mobile phone payments, loans that you’ll finish paying a few months after you completed your mortgage or defaults with only a few months left to go.

If you’d like to know more about how we can help you find lenders who regularly deal with applicants with adverse credit records, give us a call on 0808 189 2301 or make an enquiry so we can arrange for an expert to get in touch.

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Can I get a buy-to-let mortgage and live in the property myself?

A buy-to-let mortgage is designed for property intended for paying tenants. Since it is the rental income which should be paying the interest on your mortgage, it’s highly likely that living in your buy-to-let property yourself would be in breach of your mortgage conditions.

Should your circumstances change and you need to live in a property which you have bought using a buy-to-let mortgage, you will need to speak to your lender.

Is it illegal to rent a house without a buy-to-let mortgage?

While technically not illegal in every instance, you could be in breach of contract between you and your mortgage lender. At worst, you could be committing fraud.

If you own the property outright or you are a cash buyer, it is up to you how you use the property. However, if you do wish to rent out your property, you need to inform your lender as soon as possible.

While buy-to-let mortgages can be more expensive and you generally require far lower deposits to get a standard residential mortgage, if you intend to buy a property and rent it out to tenants, you must use a buy-to-let option.

Should you have a residential mortgage and want to change how you use the property, some lenders may consider giving you ‘Consent to Let’ or ‘Permission to Let’ if you’ve owned the property for a certain period of time..

Can I get a first-time buyer buy-to-let mortgage through a limited company?

Yes, it’s possible. However, this won’t increase your chances of getting an application accepted. In fact, you may find that you have to provide more background information to secure a mortgage. 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 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.

Frequently asked questions

Can I get a buy-to-let mortgage with Help to Buy?

Unfortunately, you cannot use the government’s Help to Buy: Equity Loan scheme to purchase a buy-to-let property.

In the official Help to Buy guide, it states the following:

“Help to Buy is not available to assist buy-to-let investors or those who will own any property other than their Help to Buy property after completing their purchase.”

If you are looking for a way to keep the costs of your buy-to-let mortgage down, speak with an advisor. They’ll be able to assess your circumstances and provide relevant information and advice.

What about a Help to Buy ISA or a Lifetime ISA?

You cannot use either scheme to purchase a buy-to-let property.

If you have an existing Help to Buy ISA or Lifetime ISA that you have been contributing to and wish to use either one to purchase a residential home while owning a buy-to-let property, you can use the money you’ve saved plus any interest accrued in your account, though you will be unable to qualify for the 25% top-up from the government.

As of 30th November 2019, you cannot apply for a new Help to Buy ISA, although you can apply for a Lifetime ISA.

Read our guide for more information.

Will I have to pay stamp duty?

This depends on how much your property is worth. First-time buyers won’t have to pay the 3% stamp duty surcharge on property worth up to £300,000. For properties up to £500,000, you will only pay stamp duty on the additional £200,000.

However, if you do take out a buy-to-let mortgage and plan on buying your first residential home in the future, you will have to pay stamp duty on your first residential property.

Which mortgage lenders offer buy-to-lets for first-time buyers?

The good news is that there’s actually quite a few, including a number of familiar names from the High Street. However, not every lender can cater for every individual’s particular requirements, therefore, rather than try and scour the market to find the provider that best suits your own needs, the wise move is to use the services of an independent buy to let broker.

This is where we can help. The brokers we work with adopt a whole-of-market approach which means they are best placed to be able to find the right provider who will be able to offer the best terms to suit your specific circumstances.

Can I change my residential mortgage to a buy-to-let?

Yes, you may be able to remortgage your residential mortgage into a buy-to-let, though this will depend on a number of factors, including:

  • What your property type is and how likely it is to be rented out
  • What your personal circumstances are – for example, has your credit been affected?
  • The terms and conditions on your original loan agreement

The expert mortgage advisors we work with can assess all of the above to give you an idea of what buy-to-let mortgage you could get. Make an enquiry to get started…

Speak to a mortgage expert

Finding the right lender who can provide you with a buy to let mortgage as a first-time buyer can be very time consuming – the experts we work with can do that for you.

Their whole-of-market access means they can hand-pick the best deals from lenders across the country, and some deals may not even be available to the public.

Make an enquiry or give us a call on 0808 189 2301 and we’ll match you with an expert for a free chat.

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We know everyone's circumstances are different, that's why we work with mortgage brokers who are experts in Buy to Let Mortgages

Ask us a question and we'll get the best expert to help.

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About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!

Read more about Pete

Pete Mugleston

Mortgage Advisor, MD

FCA disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. 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.

Some types of buy to let mortgages are not regulated by the FCA. 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. Equity released from your home will also be secured against it.

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