logo
Call Us
0330 304 3040
General Enquiries
info@revolutionbrokers.co.uk

Thinking of Buying a Home?

We specialise in all aspects of Residential & Commercial Lending; we are your guiding partner throughout the borrowing process.

Get Started

Pros and Cons of First Time Buyer Buy to Let Mortgages

Pros and Cons of First Time Buyer Buy to Let Mortgages

Investing in a rental property can be an excellent way to get onto the property ladder and earn an income.

However, if you haven't owned a residence before, you might find that a mainstream bank will automatically turn you down for a buy to let mortgage.

In today's guide, the Revolution Brokers team explains how you can become a rental property owner as a first-time buyer and some of the ways we ensure our clients secure competitive mortgage deals.

Please get in touch for further information or for an independent comparison of first-time buyers' best buy to let products currently on the market.

Our team is available on 0330 304 3040 or via email at info@revolutionbrokers.co.uk.

How Can I Get a Buy to Let Mortgages as a New Buyer

Let's explain that some lenders will refuse first-time buyer applicants looking for a buy to let mortgage.

That's because both circumstances are higher-risk than usual.

They might find that the combination of a new property owner and the rental nature of the mortgage combine to make the application too risky.

However, with support from a specialist broker, there is every reason you should go ahead if you've found an exciting rental opportunity.

Mortgage Criteria for a Standard Buy to Let

While each lender has different rules and assessments, we've summarised here some of the typical eligibility criteria you'll find if you look for a buy to let mortgage.

  • Deposit of at least 25% of the property value.
  • Income and affordability assessments.
  • Minimum age (18) and maximum age (sometimes 70 or 75, occasionally uncapped).
  • A reasonably good credit rating.
  • Stable employment or a sufficient annual income.

If you don't meet any of those criteria, you can still apply.

That said, you must work with a broker to signpost your application to specialist or niche lenders who offer greater flexibility in their assessments.

Lender Assessments on New Buy to Let Mortgage Applications

Applicants for a first time buyer buy to let mortgage might find that the assessment process is slightly different.

Lenders primarily need to know how much rental income the investment will generate. This income stream is how you'll pay back the interest-only buy to let mortgage.

Therefore, if you have a strong rental income potential that easily covers the mortgage payments, a lender might be more likely to approve your application, even if you've never been a landlord before.

Affordability Assessments

While rental income is crucial, lenders will also look at your average regular income.

It's important to note that the maximum buy to let mortgage value doesn't always work the same as a residential mortgage.

Standard mortgage lending looks at your yearly earnings and applies a multiple, usually four or 4.5 times, to arrive at a cap.

Buy to let lenders will still want to know what you earn, but they will approach the affordability assessment in different ways:

  • Lender A uses the residential multiple and will lend up to 4.5 x your salary, provided the rental income from the buy to let property is sufficient to cover the interest costs.
  • Lender B will lend to a landlord with a minimum annual income of £20,000 and require the rent to cover 125% of the mortgage interest.
  • Lender C doesn't look at personal income but will require the rent to be 125% to 160% of the mortgage payments, depending on your tax bracket.

Deposits Required for a Buy to Let First-Time Mortgage

Most UK lenders will accept an absolute minimum 15% deposit on a buy to let mortgage, although more often around 25%.

As a first-time buyer, you'll almost definitely need to put down a deposit of a higher value to offset the lender's risk - but if you're concerned about having a large enough down payment, please get in touch!

There are multiple alternative product options.

  • Guarantor Mortgages - If you need help putting down a deposit or providing affordability, a guarantor can support your mortgage application. Many lenders will negotiate lower deposit terms if you have mitigated the risk in this way.
  • Joint Borrow, Sole Proprietor Mortgages - This type of mortgage enables first-time buyers to purchase a rental property in their name but have another person (usually a parent) on the mortgage paperwork.

Support With First Time Buyer Rental Investments

If you're new to mortgages, investing in a buy to let can feel complex, but an experienced broker will steer you through the process and ensure you secure competitive rates.

Each lender takes a different view to assess new mortgage applicants, and a lot depends on the property you wish to buy and how much rental income it is expected to generate.

For assistance comparing buy to let mortgage deals or getting mortgage approval as a first-time landlord, please get in touch on 0330 304 3040 or via email at info@revolutionbrokers.co.uk.

webmaster

Author

Almas Uddin

FCA disclaimer

The content included in our articles, blogs, web pages and news publications is based on information accurate at the time of writing. Note that policies and criteria can change regularly throughout the UK mortgage lending market, and it remains essential to contact the consultation team to receive up to date guidance. The information included on the Revolution Brokers site is not bespoke to any circumstances or individual application scenarios and therefore is not intended to be used as financial advice. The content we share is designed to be informative and helpful but cannot be relied upon to provide individual advice relevant to your mortgage requirements. All Revolution team members are fully qualified, trained and experienced to provide mortgage advice of an independent nature. We collaborate with lenders and providers who are regulated, authorised and registered with the Financial Conduct Authority (FCA). Should you require specific mortgage borrowing types, some products such as buy to let mortgages may not be FCA regulated. The Revolution team can provide further information about regulated and unregulated lending as required. Please remember that a mortgage is a debt which is secured against your home or property. Your home can be at risk of repossession if you do not keep up with the repayments or encounter any other difficulties in managing your mortgage borrowing responsibly. This also applies to any remortgage or home loan secured against your property, including equity release products.

Do you have a question?

Call us on 0330 304 3040 or
Contact via our online form.