Buy To Let For First Time Buyer

Most people look to buy a home to live in for their first property purchase, but you might be wanting to invest in a buy to let instead.

Not every lender will consider first time buyers for a buy to let mortgage. It becomes easier once you are a residential homeowner. Being a homeowner will also give you valuable experience of the sort of issues that can arise with property.

That said, if you still want to get a buy to let for your first property, it can be done.

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

Applying for a buy to let mortgage as a first time buyer can be difficult, but not impossible. The main concern of lenders is that you may say you are going to rent the property out, but you actually plan on moving into it yourself.

Buy to let mortgages are often issued on an interest-only basis. This means that your monthly payment consists solely of interest. None of what you have borrowed is being paid back regularly. It is usually repaid by selling the property when the mortgage ends.

This is cheaper than the equivalent capital repayment mortgage. These are common on houses people buy to live in themselves. Each monthly payment goes towards repaying the debt, with some interest on top. If every payment is made in full and on time, the mortgage will be paid back at the end of the mortgage term.

Lenders therefore worry that you actually plan to live in the property yourself, but are applying for a buy to let mortgage as the monthly payments are cheaper.

In addition, the amount you can borrow on a buy to let mortgage is generally determined by the amount of rent the property might generate. Personal income and expenditure is less of a concern here, whereas if applying for a residential mortgage, income and expenditure is vitally important. If you can’t borrow enough to buy the property on a residential mortgage, lenders could worry that you are turning to a buy to let mortgage in the hope of borrowing more.

What is the criteria for a first time buyer buy to let mortgage?

There are a handful of lenders willing to consider first time buyers for a buy to let mortgage. Each has their own set of criteria. As a first time buyer you should expect a robust examination of your circumstances. The lender needs to be satisfied that you are going to rent the property out, not move into it.

For instance, some lenders will only consider you if you live in accommodation provided by your employer. This gives them some peace of mind that you really do intend to rent the property out. It also gives them a reason why you aren’t currently interested in buying a house to live in.

Not all lenders have a minimum income requirement. Those that do may insist on a minimum income of at least £25,000. Income and expenditure could also be assessed to make sure you can afford the mortgage payments. This is in the event that you do move into the property, or if there are periods when the property is not tenanted and you are not getting rent.

As with most buy to let mortgages, a deposit of at least 25% of the purchase price will likely be required. There is usually a minimum age requirement, too, which tends to be 21 or 25.

You will also undergo a credit check, as with any mortgage application. Having bad credit will make it more difficult to get a buy to let mortgage as a first time buyer.

Can I use one of the special purchasing schemes to get my first buy to let?

No. Special purchasing schemes such as Shared Ownership and Deposit Unlock are not available if the property is to be rented out.

You also can’t use money saved in a Lifetime ISA towards a deposit for a buy to let property.

Some types of buy to let mortgages are not regulated by the Financial Conduct Authority.