Buy to let for first-time buyers

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

Yes, you could, but you’ll have to jump through a few more hoops than buyers already in the property market. 

A buy-to-let mortgage is sold specifically to people who want to buy a property as an investment rather than living in it and getting a standard residential mortgage.

As a first-time buyer, that is, someone who’s never owned a residential property in the UK or abroad, you’re an unknown quantity for lenders. You don’t have a proven track record either as a homeowner or a landlord which makes you a greater risk. 

This means you might find it harder to get what you’re looking for or to get what you can afford. Many providers don’t even offer buy-to-let for first-time buyers, and those that do are likely to:

• Ask for a larger than average deposit
• Charge higher interest rates
• Look for a higher projected rental income to cover repayments. 

Your age, credit score, type of employment and income will also be taken into consideration.

Related articles 

• Compare mortgages
• Buy-to-let mortgages
• First-time buyer mortgages
• What affects mortgage eligibility?
• How to apply for a mortgage

What to consider before investing in a buy-to-let property 

There are several things to consider before investing in a buy-to-let property: 

Deposits for buy to lets are usually bigger for first-time buyers  

Getting the deposit for a buy to let may be your biggest challenge. Typically, lenders are looking for between 25% and 40% of the property value, but it could be as much as 60%. 

However, the more you can save for a mortgage deposit, the more equity (or ownership) you’ll have in the property. This could make you a safer bet for lenders and potentially give you access to more competitive mortgage rates. 

Other fees applicable to buy-to-let mortgages 

These include (but may not be exclusive to just this mortgage type): 

• Stamp duty is a tax on the price of a property. As your buy-to-let won’t be your main home, you won’t benefit from stamp duty tax breaks for first-time buyers available in England or Scotland. But if you don’t own another property, you won’t have to pay the second property surcharge. If you already own a property, or you’re buying with someone else who already owns a property, you’d be liable to the second property surcharge. You could use our stamp duty calculator for guidance to find out more about the costs you may need to pay.
• Surveys to evaluate the property’s condition and flag up any structural issues or areas in need of maintenance.
• Solicitors’ fees to cover conveyancing - the process of moving the legal ownership of a property from one person to another.
• Landlord buy-to-let insurance. This isn’t a legal requirement, but it could minimise the risks associated with renting out a property.

You need a good predicted rental income 

To be eligible for most buy-to-let mortgages, predicted rental income usually needs to cover 100% of the mortgage plus an extra 25%, but it’s likely to be more for first-time buyers.

This means your income and employment status are very relevant to prospective lenders. They’ll want to know whether you can cover repayments if the rent doesn’t come in.

Having a solid business plan for your investment property which details costs versus predicted revenue can give your case extra credibility. This is even more applicable if you’re planning for this to be the first of several buy-to-let properties.

It also pays to choose a buy-to-let property in an area that you know well, so you’ve got a good understanding of the sort of people who are looking to rent and where the best locations are. 

Most buy-to-let mortgages are taken out on interest only 

Most buy-to-let mortgages are taken out on interest only, meaning that you only pay the interest on the loan each month. The capital debt – the full mortgage value – will still need to be paid off at the end of the agreed term.

This means lower monthly outgoings, which could give you the chance to capitalise on your investment and make a healthy profit from your rental income.

But your capital debt won’t go down at all unless you make extra repayments. You may be able to extend your buy-to-let mortgage at the end of the term or you could sell up instead. But don’t assume that this will give you the money you need to pay off the remaining amount.

There’s a risk that if property prices fall, you may not get the price you hope for, and you’d have to make up the difference to pay off the debt.

Some buy-to-let investors choose a repayment mortgage instead. This allows them to pay back both the interest and a small part of the capital every month over a fixed term – usually 25 years – by which time the mortgage should be paid off.

Being a landlord brings big responsibilities 

As a landlord, you’re potentially on call 24/7 to deal with any problems, from gas leaks to broken windows.

A letting agency can make your life easier, although of course there’s a cost attached to their services. 

Depending on what you need, they could: 

• Advertise your property
• Find tenants and run the necessary checks. (All landlords are now legally required to run right to rent checks on any tenant over 18 using the online service at GOV.UK.)
• Handle deposits
• Collect the rent on your behalf
• Do all the necessary paperwork
• Take care of the property maintenance 

If you don’t maintain the property to acceptable standards or you neglect to carry out repairs, your tenants can take you to the small claims court.

Having a list of professional tradesmen and women to do the work as needed should ensure you meet the necessary health and safety standards.  

Can you cover times when there’s no rent coming in? 

You need to make provision for ‘voids’ – times when the property is unoccupied, or tenants aren’t paying their rent. Having money stored away in a savings account could give you the buffer you need. 

It makes sense to put aside three months’ rent to cover emergencies.

When considering mortgage affordability, it’s important to know that your home or property may be repossessed if you do not keep up with your mortgage repayments. Therefore, you need to ensure that you’re comfortable with the monthly repayments for your agreed term.

All mortgage applications are subject to status and lending criteria, and are based on your individual circumstances. Applicants must be 18+ and a UK resident.

The Financial Conduct Authority does not regulate most Buy to Let mortgages.

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