Buying to Let as a First Time Buyer

If you're considering your buying to let as a first time buyer, you've come to the right place... Different lenders have different rules for accepting first-time buyers for Buy to Let mortgages. However, there are lenders who will accept first-time buyers without prior buying history.

In this insight, we will examine the first time buyer buy to let options and explain all you need to know on how to obtain a buy-to-let mortgage.

Key Takeaways

• It's possible to obtain a Buy to Let as a first time buyer, but not every lender will help you.
• Many lenders set an eligibility criteria around age, income and property experience.
• You need your lenders permission to let out your property. You can apply for Consent to Let to agree this.
• You can live in your first time buyer home and later change your Mortgage to a Buy to Let Mortgage.

Buying to Let as a First Time Buyer

First-time buyers can obtain Buy to Let mortgages, but approval is not always straightforward. Lenders have varying policies and minimum criteria. You will need to research lenders that meets your specific requirements.

Criteria:

If you are looking to obtain Buy to Let mortgages as a first time buyer, you're going to need to consider the following criteria:

Age

The minimum age for a first-time buyer to obtain a buy-to-let mortgage is 18, which is the minimum age for all borrowing in the UK. However, some lenders may have a higher minimum age requirement, such as 21 or 25 years old. Lenders may charge different interest rates based on the level of risk they are willing to take on. It is advisable to review multiple lenders to find the most suitable and cost-effective options.

Minimum Deposit

As a first-time buyer, you will need to provide a minimum deposit of 25% for a Buy to Let mortgage, which is a significant increase compared to the 5% deposit required for a residential mortgage. This is due to the difference in affordability assessments and lender risk between Buy to Let and residential mortgages. Lenders require a larger deposit for Buy to Let mortgages to account for the higher risk associated with such properties.

Minimum Income

When applying for a Buy to Let mortgage as a first-time buyer, most lenders will expect you to have a minimum annual income of £25,000. However, this is not always a strict requirement, and some lenders may be flexible depending on the circumstances. Lenders want to ensure that even if your property is unoccupied for a period of time, you will still be able to make your mortgage payments. Therefore, they may require you to provide evidence of your personal income, such as payslips or SA302's if you are self-employed.

Maximum Loan amount

Whether you are an experienced buyer or a first-time buyer looking for a Buy to Let mortgage, the same policies apply. You will need to provide a minimum deposit of 25% and obtain the remaining 75% through a mortgage. The mortgage must be self-financing, which means that the rental income should cover the mortgage repayments. Typically, the rental income should be 125%-140% of the mortgage repayments for the mortgage to be approved.

Example

Let's say that the monthly mortgage repayment is £800. In that case, the lender would require the monthly rental income to be at least 125% of the mortgage repayment, which would be £1,000 (i.e., £800 x 1.25 = £1,000). This means that the monthly rental income from the property should be at least £1,000 to be eligible for the Buy to Let mortgage.

The amount you can borrow depends on the amount of deposit you can raise and whether the rental income is sufficient to cover the mortgage payments.

Buying to Let as a First Time Buyer Mortgages

Interest-only Buy to Let mortgages are an acceptable option for first-time buyers, provided that the lender's eligibility criteria are met. You will need to provide a minimum deposit of 25% and ensure that your rental income is sufficient to cover the mortgage repayments. Some lenders may also have additional requirements, such as a minimum age or minimum personal income. It is important to research and compare different lenders to find the most suitable option for your needs.

Buy to Let First Time Buyer Deposit

You need 25% deposit for a Buy to Let Mortgage, regardless of being a first-time buyer.

Can I take out a residential mortgage and let it out anyway?

Renting out a residential property that has been purchased with a residential mortgage is typically a breach of the mortgage conditions unless you meet certain criteria. The conditions of the mortgage will generally require you to occupy the property yourself unless it falls under one of the following conditions:

• The property is rented to family or relatives
• There is no tenancy agreement in place
• It is a second home
• You have obtained "Consent to Let" from the lender.

Can I switch my residential mortgage to a Buy to Let?

Switching from a residential mortgage to a Buy to Let mortgage is possible, but you will need to meet the criteria of a Buy to Let mortgage to be approved for the remortgage. This typically means having at least 25% equity in the property and an estimated rental income that will cover the mortgage repayments.

Am I still a first time buyer if I own a Buy to Let?

You are not considered a first time buyer if you own a property in the UK, or abroad. This is the case even if you inherit your property.

Letting Out Existing Homes as a First Time Buyer

Can I rent out my first time buyer home?

The decision to rent out a property that was initially intended to be your primary residence can be a viable option for many homeowners. However, it's essential to ensure that you meet the criteria for a Buy to Let mortgage or obtain consent to let from your lender.

It's worth noting that if you're purchasing an additional property, you may face higher rates of stamp duty and other associated costs. However, renting out a room, using the rent a room scheme, in your primary residence can be a way to generate extra income and help pay off your mortgage. Be sure to check with your lender if they allow it before proceeding.

The concept of renting a room out to pay your mortgage has more recently been known as House Hacking.

What is Consent to Let?

Consent to Let is an agreement given by the lender of a mortgage that permits the owner to rent out the property to tenants. However, it is only granted on a case-by-case basis, and there are certain circumstances where consent to let will be allowed on a residential mortgage. Generally, a minimum amount of equity in the property is required for approval.

Can I get Consent to Let as a first time buyer?

It's possible for a first-time buyer to get consent to let on their mortgage. Lenders consider each application individually. To increase the likelihood of approval, it's best to have at least 25% equity in the property and provide valid reasons for needing to let the property beyond just financial gain.

Next Steps When Buying to Let as a First Time Buyer

The quickest and easiest way to understand your Buy to Let first time buyer options is to speak with a mortgage adviser. An adviser who is "whole of market" will not be limited to just one or a few lenders. They can search through many different lenders. Doing this research alone would require a lot of time and potentially many different applications.

Another option to consider is whether you can arrange limited company buy to lets to remove some of the existing restrictions on first time buyers.

If you're buying to let as a first time buyer but you're unsure where to get started, complete the Sunny Fact Find. The answers you provide help us to find the best-suited adviser, your adviser then contacts you to discuss how they can help. You decide how to proceed. For more insights, consider : Is Buy to Let Worth it?