Points to Consider When Considering a Buy-to-Let Mortgage First-Time Buyer Product
Rental properties can provide a stable, long-term income, but there are several responsibilities and financial obligations associated with being a buy-to-let first-time buyer owner.
We’d also suggest a prospective first-time buyer buy-to-let investor evaluate:
- Their intention to buy a residential home after the buy-to-let first-time buyer mortgage. It may be harder to take out a mortgage on a home if you have a rental mortgage debt.
- If your plans change and you decide to live in your first-time buyer buy-to-let mortgage, you will need approval from your lender, in the same way as if you wished to use a property on a residential mortgage as a rental.
- Acting as a landlord can be profitable and generate a good income – but you will normally need two to three years of experience and accounts to apply for a self-employed mortgage in the future.
However, if you do not need to buy a home through a first-time buyers scheme, for example, because you live in an inherited property or with family members, the income from a buy-to-let first-time buyer residence could generate enough earnings to buy another home in the future.
Living in a Home Purchased as a Buy-to-Let First-Time Buyer
As we’ve touched on, the rules around living in a property purchased as a buy-to-let depend on the lender, but you may be able to transfer a first-time buyer buy-to-let mortgage to a residential product and vice versa. Not all lenders will do so, and a remortgage may be necessary.
Choosing the Best First-Time Buyer Mortgage for a Buy-to-Let
Lender criteria will usually be different in a buy-to-let mortgage first-time buyer application than a standard mortgage because rental mortgages are higher risk and therefore require a higher deposit.
Mortgage providers will also need to know the rental income you expect to receive from a first-time buyer buy-to-let property.
Normally, they will want to see a deposit of at least 25%, a good credit history, and will evaluate your employment status, income, age and affordability before agreeing to a buy-to-let first-time buyer mortgage.
The buy-to-let first-time buyer assessment process also varies, and a mortgage provider will ask for documentation such as payslips, business accounts, a copy of your employment contract, up to six months of bank statements, a landlord’s reference where applicable and your address history.
Before moving ahead with a buy-to-let mortgage first-time buyer agreement, a lender will also wish to see proof of the projected rental earnings, usually provided by a letting agent or surveyor who can issue a written rental evaluation.
Standard terms mean you’ll need to show expected earnings of between 125% and 140% of the buy-to-let first-time buyer monthly mortgage costs to be eligible.
Payment Terms on the Best First-Time Buyer Mortgage for Landlords
First-time buyer buy-to-let mortgages are usually interest-only, which means the monthly payment comprises solely the interest, without repaying any of the borrowed capital. The concept is that a buy-to-let first-time buyer simply needs to cover the mortgage interest with the rent to make a profit.
The outcome is that repayments on a buy-to-let first-time buyer loan will usually be lower. However, the capital remains unpaid, so you will need to remortgage or sell at the term end.
Average Interest Rates on Buy-to-Let First-Time Buyer Mortgages
The best first-time buyer mortgage rates won't apply to a buy-to-let first-time buyer since residential and rental mortgages are different products and are often available from different lenders.
It's also important to clarify that you won't be able to use any first-time buyers scheme to reduce the costs or improve your eligibility. A first-time buyer stamp duty calculator won't apply since the higher threshold only applies to residential properties.
Interest rates are higher and will depend on the property value and projected rental income. Some first-time buyer buy-to-let lenders will also stipulate that you need a separate annual income, often of at least £25,000.
Most first-time buyer buy-to-let lenders will expect a deposit of at least 25%, compared to 5% on a regular mortgage, so you will be able to borrow a much lower Loan to Value maximum.
However, it is certainly possible to invest as a buy-to-let first-time buyer, provided you understand the additional costs and criteria. The other aspect of becoming a first-time buyer buy-to-let owner is that the rental income should more than cover the interest-only repayments, so you should be able to generate a profit fairly quickly.
Expert Advice on Applying for a First-Time Buyer Buy-to-Let Mortgage
Revolution Finance Brokers is an independent, whole-of-market broker specialising in non-standard mortgage agreements. If you are looking for the best first-time buyer mortgage to purchase a buy-to-let, please get in touch at any time to discuss the options and the ideal mortgage structure for you.
2023-05-09 
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