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

Posted by Simon Banks, November 24, 2021

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

Can you purchase a buy-to-let as your first property

Most people’s first homes are bought with a residential mortgage and the intention of living there. Yet there are some with aspirations of investing, meaning their first foray into the world of bricks and mortar involves purchasing a buy-to-let to rent out. But just how easy is it to buy an investment as your first property if you need a mortgage, and can you even do it? We’ve got the answers in this with everything you need to know about purchasing a rental home as your first property. 

Can my first property purchase be a buy-to-let?

The short answer is yes, though it’s not a common route taken by many in the UK, and it’s by no means a straightforward process. Getting on the property ladder is becoming increasingly difficult for first-time buyers. Consequently, the government created several schemes to help new homeowners get the keys to their first home. 

Yet, there are no such schemes for would-be first-time landlords. That means purchasing a buy-to-let as your first property can be even more of a challenge as lenders often view first-time buyers as high risk. They’re usually only willing to lend under specified conditions. 

Should I get a buy-to-let as a first-time buyer?

A first-time buyer typically purchases their own home before going on to buy somewhere with the intention of renting it out. Once you already have a residential mortgage in place, lenders are more relaxed about lending you a buy-to-let mortgage for an investment property. 

Being a landlord means taking on a fair bit of responsibility, and it’s helpful if you have knowledge of what it’s like to own and live in a home, along with all the scenarios that can bring – such as repairs, general upkeep and even redecoration. 

Yet, there are scenarios where getting a buy-to-let as your first property makes sense. Maybe you’ve rented for many years and have a thorough understanding of how everything works. Or perhaps you’ve inherited a property and live there without the need to pay a mortgage. Or maybe you live with a partner and aren’t named on the mortgage. 

Whatever the reason, the answer to whether you should get a buy-to-let as a first time buyer comes down to your circumstances. While it’s not the conventional way of getting your first property, it can be a good investment as long as you’re willing to embrace the responsibilities involved with being a landlord.

It’s always best to seek professional advice before making a conclusive decision, speaking to letting agents and even a financial advisor to see if all the numbers add up. 

How can I get a buy-to-let as a first-time buyer?

You will need to find a lender willing to lend to people buying an investment as a first-time buyer. Many mortgage lenders not only require you to have previously had a residential mortgage, but they also want to see that you currently live in the home you own.  If you don’t, they’ll look to other aspects, such as whether you’re already a landlord with experience.
Eg, someone who doesn’t live in the home they own but has several rental properties will be considered a serious landlord and therefore stands a higher chance of getting a buy-to-let mortgage than a person who is doing it for the first time and doesn’t live in the home they own (eg, they rent). 
In fact, most lenders require you to have at least 12 months’ experience as a residential buy-to-let landlord. This helps them see that you’re reliable and know how to manage a rental property.  But if you’re still determined to borrow a buy-to-let mortgage to buy a rental home as your first investment, it might be worth speaking with a broker who can try and find lenders willing to lend. Just be prepared to jump through a few hoops and potentially pay higher rates. 

Buy-to-let requirements

(these are the most common buy-to-let requirements but may vary from lender to lender)

Individual related

Property related

Earn at least £25k per year Property needs to be in mortgageable condition, eg not in disrepair
Own the home you live in (or previous landlord experience) Monthly rental income should be at least 125% of the monthly mortgage payments
Under 75
Have a good credit score
Have a deposit amounting to 25% of the property’s value

What are buy-to-let mortgage rates like for first-time buyers?

Most buy-to-let lenders require landlords to have a deposit of between 15-25% of the property’s value to get a mortgage. As a first-time buy-to-let buyer. However, you will likely have to pay significantly more. 

This is where things become complicated. To illustrate, first-time residential buyers can often access mortgages with a 95% loan-to-value, meaning they only need to pay 5% from their own pockets. 

There’s no set figure for how much you’ll need to pay as a first-time buyer looking for a buy-to-let, but it will be significantly higher than a 5% deposit. You could find yourself having to cover between 40 and 50% of the purchase price. 

Typical mortgage deposit requirements

(these are the most common deposit requirements for residential and buy-to-let but may vary from lender to lender)

Residential

Buy-to-let

5% minimum deposit15% minimum deposit
15% average deposit25% average deposit
 Between 40% and 50% for first time landlords without previous homeownership

You’ll also need to take the mortgage structure into account. Buy-to-let mortgages are usually interest-only. That means you’ll only pay back the interest, resulting in lower monthly payments and higher rental profits. However, you’ll need to show that you can pay back the mortgage in full at the end of the term, usually with the sale of the property. 

Can I use a guarantor?

Again, guarantors are more common when getting a residential mortgage, though it is possible to use one for a first-time buy-to-let depending on the lender. Some mortgage lenders will consider them, especially if you don’t meet the full requirements. 

Each lender has their own unique process for assessing borrowers, and some may be willing to accept a guarantor while others won’t. You’ll only really find out which option is best for you with the mortgage lender or by getting professional advice. 

Lenders assess affordability in a completely different way for buy-to-let than they do residential. Mortgage underwriters are more focused on the predicted rental income for the property, with other factors like your own personal earnings being a secondary factor. Therefore, the need for a guarantor probably won’t be as pressing compared to residential mortgages. 

Final words: buy to letting for the very first time

While a buy-to-let mortgage isn’t conventional for first-time buyers, it is possible. Owning a rental property is a big decision that comes with plenty of responsibilities, so you need to be confident that you’re up for the challenge. But if all the optics make sense and you’ve done your research and have the finances in place, investing in a buy-to-let for your first property could be a smart move for earning passive income and getting on the property ladder. 

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