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First Time Buyer BTL

With average monthly rents skyrocketing across the UK, it is understandable that more homeowners than ever before are considering buy-to-let investments.  More often than not, buy-to-let investment opportunities are considered by those who already own their own homes and are looking to invest in a second (or third, fourth etc.) property.

Though this does not mean it is not possible to get a buy-to-let mortgage as a first-time buyer. Whether you live in rental accommodation or share a property with family members, you may still be able to qualify for a buy-to-let mortgage and generate long-term rental income.

Additional factors need to be taken into account by first-time buyers considering buy-to-let mortgage investments.

First-Time Buyer Buy-To-Let Mortgage

Before applying, it is important to understand that the vast majority of mainstream banks and lenders will only consider applications from existing property owners. It is typically a prerequisite with High Street banks that the applicant either owns their own home or already has at least one residential property under their ownership.

This means that you will inevitably find your options more limited than if you were applying for a buy-to-let mortgage as a homeowner. Securing the financial support you need on the High Street may be difficult, which is where the help and support of an independent broker can prove invaluable.

Speak to a specialist buy-to-let mortgage broker ahead of time to discuss the available options and ensure you find the right lender for your requirements and your budget.

What Kind of Deposit Will I Need to Pay?

Minimum deposit requirements vary significantly from one lender to the next, in accordance with the requirements and financial position of the applicant. With a buy-to-let mortgage for a first-time buyer, you can expect to be asked for a minimum of 25% – sometimes significantly more.

If you are able to comfortably provide a larger deposit, doing so could increase your likelihood of qualifying for a mortgage and help you access a more competitive deal.

If the Rent Covers the Mortgage Payment, Does Anything Else Matter?

Ensuring the rent you charge on your buy-to-let property covers the mortgage payment is important, but there are additional costs and occasional expenses to take into account. Examples of which include landlord insurance, on-going maintenance, emergency repairs and general contingencies.

This is why lenders usually expect to see projected monthly rental income of 125% to 140% the actual mortgage payment. This ensures there is always a little additional ‘breathing room’ to cover supplementary costs, while allowing the borrower to comfortably cover their repayments.

How Can I Establish Projected Rent Income?

Working out how much you can (and should) charge by way of monthly rent payments means speaking to a local lettings agent. It is simply a case of checking what prices similar properties to yours are being let for in your area, in order to come up with a rough estimate.

Formal evidence of this projection will be required to process your application, so ensure the lettings agent you work with is reputable and reliable.

What Additional Costs Will I Need to Cover?

Most additional costs accompanying a buy-to-let investment are similar to those of a conventional mortgage. Solicitor’s fees, surveys and stamp duty (where applicable) must be taken into account, as long with tax obligations on your rental income and any immediate maintenance or improvements that need to be carried out.

Property insurance is also essential, while landlord insurance is considered optional but is definitely worth considering. As a landlord, you will also need to ensure you always have enough money to one side to cover emergency repairs and renovations, as and when required.

What Kind of Documentation Is Required to Apply?

Your lender will be primarily interested in the extent to which you can comfortably cover your buy-to-let mortgage repayments. This means that in terms of documentation, you will need to provide the same formal evidence as you would when applying for a conventional mortgage.

Examples of which include formal proof of identification and address, evidence of employment status and income, documents verifying projected rental income and so on. You will also be expected to undergo an extensive credit check, along with all the usual ‘stress tests’ to ensure you can afford to take out the loan.

Who Should I Turn to For Advice?

Consulting directly with any specific lender inevitably means accessing biased and one-sided advice, limited to their own in-house products and services. This is why it is important to consult with an independent broker beforehand, who can help you make sense of the available options and find your ideal buy-to-let mortgage specialist.

Likewise, an established broker will also be able to carry out a whole-market buy-to-let mortgage comparison on your behalf, helping you find an unbeatable deal from a reputable lender.

Can I Get a Buy-to-Let Mortgage with Bad Credit?

The short answer is yes, although you will be more limited in terms of the available options. Most mainstream banks and lenders are unwilling to consider applications from poor-credit applicants. Elsewhere, independent lenders are more accommodating and flexible with their eligibility checks.

If you have poor credit, the rest of your financial status and future outlook will be taken into account. For example, if you are able to provide a relatively large deposit and have a comprehensive proof of an elevated income level, there is a good chance you will qualify – irrespective of your credit history.

In addition, it is important to note that the extent, severity and recentness of your credit issues will influence your eligibility for a buy-to-let mortgage – not just their presence alone.

Can I Live in the Property I Buy?

The terms and conditions set out in your mortgage contract will determine how you can and cannot use your buy-to-let property. In most instances, lenders conduct regular checks to ensure that the borrower does not reside in the property under any circumstances.

If you are found to be living in your buy-to-let property and in doing so are contravening your mortgage agreement, your lender could take legal action against you.

Which Lenders Are Worth Approaching with My Buy-to-Let Mortgage Application?

While it is not impossible to qualify for a buy-to-let mortgage as a first-time buyer on the High Street, you may find yourself with very few viable options available. This is one of the reasons why it is important to consult with an independent broker, who can help you find your ideal lender from an extensive panel of buy-to-let mortgage specialists.

Working with an established broker is also the best way of comparing every buy-to-let mortgage available, ensuring you access an unbeatable deal at a price you can afford.

Last Updated: Apr 9, 2020 @ 12:58 pm
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