Buy To Let For First Time Buyer
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Most people look to buy a home to live in as their first property, but you might be interested in a buy to let investment instead.
Not all lenders offer buy to let mortgages to first time buyers. It’s easier to get one if you already own a home, plus you’ll have experience of dealing with property issues.
That said, you can still get a buy to let for your first property.
Can I get a buy to let mortgage as a first time buyer?
It can be hard to get a buy to let mortgage as a first time buyer, but it’s not impossible.
Lenders worry that you might say you’ll rent out the property but actually live in it yourself.
Why do lenders think I might move in to my first buy to let?
Buy to let mortgages are often interest-only, meaning your monthly payments only cover the interest; none of it is repaying the loan. This makes payments cheaper than for a regular repayment mortgage, where payments include both interest and loan repayment.
Lenders worry you might apply for a buy to let mortgage to save money and then live in the property, which would be fraudulent.
Also, the amount you can borrow for a buy to let is based on expected rental income, not your personal income and expenses. If you can’t borrow enough with a regular mortgage, lenders worry you might try to get a buy to let mortgage instead, but still live in the property.
Why am I not allowed to move into my own buy to let?
Buy to let mortgages are for renting to paying tenants. If you want to live in the property, you need a residential mortgage.
Moving into a buy to let property would breach the mortgage terms, and the lender could demand full repayment and take legal action.
Can I buy my first property as a buy to let and move a family member in?
Renting to relatives requires a special type of mortgage known as a regulated mortgage, which is harder to get, especially for first time buyers. Few lenders offer these, and they usually require you to be a homeowner first.
Renting to family members is seen as riskier than renting to people who aren’t related to you because relatives might expect low rent, or because you might not be prepared to kick them out if they don’t pay.
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Do you have a question?
Is there specific criteria for a first time buyer buy to let mortgage?
A few lenders will consider first time buyers for a buy to let mortgage, but each has its own criteria.
Expect a thorough review of your circumstances; the lender needs to ensure you plan to rent the property out and not live in it.
Some will only consider you if you live in accommodation provided by your employer. This reassures them that you truly intend to rent out the property and explains why you aren’t buying a home to live in.
Is there a minimum age requirement for a first time buyer buy to let mortgage?
Yes, there is usually a minimum age requirement, which might be higher than for a standard residential mortgage. For buy to lets, it’s typically 21 or 25, depending on the lender.
Is there a minimum income for a buy to let mortgage for a first time buyer?
Not all lenders have a minimum income requirement, but those that do usually set it at £25,000 minimum.
Even without a specific minimum, lenders generally want to see some earned income to ensure you can afford the payments if the property is vacant and not generating rent.
How much can I borrow?
The amount you can borrow for a buy to let mortgage is usually based on the expected rental income of the property. The lender will assess the property’s value and potential rental income during the application process.
Lenders need the property to be self-funding, meaning the rent should cover the mortgage payments and leave some extra for maintenance and profit. The exact calculation varies by lender and can be influenced by factors like your tax bracket and the term of your fixed interest rate.
Even though the loan amount is typically based on rental income, your personal income and expenses may also be assessed to make sure you can manage both your lifestyle and the mortgage payments during rental voids.
What deposit is needed?
The minimum deposit for a buy to let property is usually 25%. A larger deposit might be needed in some cases, such as if you have poor credit.
The deposit for a buy to let is generally higher than for a residential mortgage because lenders see buy to lets as riskier. They don’t know anything about the tenants and there’s always a risk of late rent payments, property damage, and/or the need for significant repairs before resale if the property is repossessed.
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Can I use one of the special purchasing schemes to get my first buy to let?
No, you can’t use special purchasing schemes such as Shared Ownership or Deposit Unlock for a buy to let property.
You also can’t use money saved in a Lifetime ISA for a buy to let deposit.
Do I have to pay Stamp Duty on a buy to let purchase as a first time buyer?
Yes, you have to pay the standard rates of Stamp Duty.
You won’t get the first time buyer relief if you’re buying to rent out the property, but you don’t have to pay the extra 5% surcharge on your first purchase.
What documents are needed?
The documents needed for a buy to let mortgage for a first time buyer are the same as for a standard residential mortgage.
They include proof of ID and proof of address, and income verification. You’ll also need bank statements showing both income and expenditure and evidence of deposit.
How can The Mortgage Store Chorley help with buy to let mortgages for first time buyers?
Looking to buy your first property to rent out? The Mortgage Store in Chorley is here to help!
We know buy to let mortgages and can guide you through the process step by step. We’ll explain everything in simple terms, making it easy for you to understand.
With our expertise and support, you’ll be on your way to becoming a successful landlord in no time. Contact us today to get started!
Some types of buy to let mortgages are not regulated by the Financial Conduct Authority.
