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First-Time Buyer Buy-to-Let Mortgages

Written By:
Myles Robinson - Expert Finance Advisor

Posted: Aug 12, 2022

Are you a first-time buyer interested in embarking on a property investment journey? Purchasing your first home is a significant milestone, and when combined with the possibilities that a buy-to-let mortgage offers, you enter a realm of exciting investment opportunities.

At Loan Corp, we want to ensure that securing your buy-to-let mortgage runs smoothly. We appreciate how challenging it can be to get onto the property ladder. 

In this guide, we will dive into the details of first-time buyer buy-to-let mortgages, addressing the most commonly asked questions and providing expert advice on what you need to include in your mortgage application, empowering you to apply for your first-time buyer mortgage.

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What is the Difference Between a First-Time Buyer Mortgage and a Buy-to-Let Mortgage?

Typically, a first-time buyer will purchase a home with the intention of living in it before they embark on a property investment journey in which they buy a property with the intention of renting it out.

A first-time home buyer can buy a residential property using money they have saved through government schemes such as Help-to-Buy or Lifetime ISAs. For first-time buyers, many mortgage options are available, such as no deposit or 5% deposit mortgages, which aid prospective buyers in owning their first home.

On the contrary, a buy-to-let mortgage (BTL) is designed to help individuals purchase a property as an investment rather than live in it.


Can a First-Time Buyer Get A Buy-to-Let Mortgage?

As a first-time buyer, it is possible to get a buy-to-let mortgage. However, mortgage lenders view this type of loan as a higher risk because you might not have experience as a landlord.

If the property is vacant, there could be a shortage of funds. Many mortgage lenders will ask you to make a higher deposit to reduce the risk or to expect a higher rental yield. This doesn’t necessarily mean that every lender will require a first-time buyer to pay more for their mortgage.

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First-Time Buyer Buy-to-Let Mortgage Criteria

You may not have as many mortgage lenders available to you as you might like if you are a first-time buyer. However, don’t despair. Many providers will accept applications from investors who do not own their homes.

Lender-to-lender criteria may vary, but many mortgage lenders expect borrowers to meet the following eligibility criteria:

→ Larger deposits (minimum 25% of property’s value)

→ Income/affordability

Age of the borrower

→ Rating credit

→ Types of employment

For more information about how to meet these criteria, refer to our buy-to-rent mortgage guide.


Additional Application Documents

Lenders may consider you a higher risk as they have no evidence of your reliability in making timely mortgage repayments. Therefore, you will need to provide additional documentation and information, such as:

A reference from your current landlord (if you rent).

→ A more extended address history (standard is three years).

→ There are several wage slips

→ Bank statements for up to six months

Lenders will also require evidence that your monthly rental income is at least one per cent higher than your mortgage payments. This is approximately 125% for buy-to-let applications. However, if you are a first-time purchaser, it could be 145%.

If you were a first-time buyer with a £500 buy-to-let mortgage, your lender would expect a rental income of £725.

Although fewer mortgage lenders will provide buy-to-let loans to first-time buyers than to standard applicants, it doesn’t mean you won’t be able to find great deals.

Our independent mortgage advisors have access to the whole market. This means they can compare every mortgage lender’s eligibility and affordability criteria to find the best deal for you.

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First-Time Buyer Buy-to-Let Mortgage Application Process

Lenders will approach applications differently than they would with a buy-to-let standard.

Lenders will be interested in your rental potential. The lender will be interested in your ability to bring in enough money to cover the mortgage by renting the property.

If you are a first-time purchaser or a landlord, the lender will pay more attention to your income and ability to make the payments, if necessary. The exact process applies to you as if you were applying for a residential mortgage.

Lenders will pay close attention to your credit score. However, if you have poor credit, don’t let this deter you from submitting your application. Although your options are limited, many lenders will take your application for a buy-to-let mortgage even with poor credit.

The lender’s views on your particular adverse credit history and their willingness to accept your application will differ depending on the severity of the situation (anything from late payments to repossessions, bankruptcy, or late payments could be considered), the time it was recorded, and whether or not it has been settled.

At Loan Corp, we can connect you with lenders specialising in advising prospective first-time buyers with poor credit. Enquire now so we can match you with an expert mortgage broker who can meet your needs.

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What are my Mortgage Options as a First-Time Buyer?

A standard buy-to-let mortgage requires a minimum of 15% deposit. However, some lenders may require more if you are a first-time borrower to offset the risk. You may not be able to afford the property you want, even if you are offered the same terms and conditions as the existing landlords.

You have many options if you are unsure if you can afford a mortgage to buy-to-let. These options include:


Guarantor Mortgage

You can use a guarantor if you need help getting your buy-to-let mortgage. This type of mortgage means your guarantor is responsible for covering your monthly repayments if you default on payments. Some mortgage lenders will offer lower deposit terms to guarantors who agree to pay any missed mortgage payments.

Guarantors must be listed on title deeds. However, they won’t own any part of your property. For added security, your mortgage lender may request a charge onto your guarantor’s own property.


Joint Borrower Sole Proprietor Mortgage

A joint borrower sole proprietor mortgage (JBSP) enables first-time buyers to purchase a property with the help of up to four people, including parents. You can purchase a buy-to-let in your name as a sole or joint borrower. Combining applicants makes it much easier to qualify for a mortgage as they will all be responsible for the mortgage repayments, but only one person will own the property.

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First-Time Buyer Buy-to-Let Mortgage Affordability

Lenders typically approve a loan for 4.5x a borrower’s annual salary. However, in some cases, they are willing to offer a loan for 5x your salary if you provide evidence that you are reliable for the repayments.

A first-time buyer could borrow between £120 and £150k if he or she is a landlord making £30k per annum. This assumes that the rental income is sufficient to pay the mortgage payments.

Previously, mortgage lenders would assess affordability for buy-to-let mortgages solely on rental income. However, some borrowers could not afford a residential mortgage and instead used this as a way to live on the property. To avoid this issue, lenders will verify the income of buy-to-let mortgage applicants who don’t own any other property.

Use our mortgage affordability calculator to estimate how much you will be eligible to borrow for your buy-to-let mortgage.

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Rules and Regulations of Buy-to-Let Mortgages

Can I Live in My Property with a Buy-to-Let Mortgage?

A buy-to-let mortgage can be used to finance a property that is intended for tenants. It is your rental income that should pay the interest on your mortgage. Therefore, it is highly probable that you would violate your mortgage conditions by living in your buy-to-let property.

If your circumstances change and you need to live in a property you bought with a buy-to-let mortgage, your lender will be able to assist you.


Can I get a Buy-to-Let Mortgage as a First-Time Buyer Through a Limited Company?

Yes, it’s possible. This won’t improve your chances of being accepted. You may need to give more background information to get a mortgage. Lenders will still be willing to approve your application just like they would for a residential mortgage.

You will need a lender who can lend to limited companies or first-time buyer landlords.

If your situation falls into one of these niches, you need access to all the markets to find the right lender. Our advisors have this access, so contact us for help finding the right mortgage provider for you.


Can I Legally Rent Out My House Without a Buy-to-Let Mortgage?

Although technically, it is not illegal to do so; you may be breaking the contract between yourself and your mortgage lender if you start letting out your property without a buy-to-let mortgage. You could even be guilty of fraud.

It doesn’t matter if you own or buy the property in cash. You can choose how to use it. However, you must inform your lender immediately if you want to rent your property.

Buy-to-let mortgages are more costly and require lower deposits than a standard residential mortgage. Therefore, if you intend to purchase a property and rent it to tenants, you will need a buy-to-let option.

If you own a residential mortgage and wish to start renting it out, you should speak with your lender, who can advise you on converting your first-time buyer mortgage to a buy-to-let mortgage. However, this will depend on many factors, such as:

→ How likely is it to be rented?

→ How are your personal circumstances? For example, how has credit been affected by your credit score?

→ These are the terms and conditions of your original loan agreement

Our expert mortgage advisors can help you determine what type of buy-to-let mortgage is best for you.

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Repaying Your Buy-to-Let Mortgage

There are two types of buy-to-let mortgages available to first-time buyers:

Interest-Only: Most lenders offer buy-to-let (BTL) mortgages as interestonly. With a suitable repayment vehicle, you must ensure you can repay the entire loan at the end. When you submit your application, mortgage lenders must know how you plan to repay the loan.

Repayment-Only: Many lenders offer repayment buy-to-let mortgages. This option allows borrowers to pay off their mortgage with interest each month. Our experts can help you locate a provider that can meet your needs.

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Buy-to-Let Mortgages for First-Time Buyers FAQs

Can I get a mortgage to buy-to-let with Help-to-Buy or Lifetime ISA?

Unfortunately, you can’t use the government’s Help to Buy: Equity Loan program or your Lifetime ISA to purchase a property to rent.

The Help to Buy official guide states the following:

“Help To Buy” is not available for buy-to-let buyers or those who plan to own other properties than the Help to Buy property they have purchased.

You can no longer apply for a Help to Buy ISA after 30 November 2019. However, you may apply for a Lifetime ISA. Talk to an advisor if you’re looking for ways to lower the cost of your buy-to-let mortgage. An advisor can assess your situation and give you the right advice.


Do I have to pay stamp duty on my buy-to-let?

It depends on the value of your property. For properties up to £300,000., first-time buyers don’t need to pay the 3% surcharge. Stamp duty will be charged only on properties over £500,000.

If you use a first-time buyer buy-to-let mortgage for a rental property but wish to purchase a home in the future, stamp duty will be payable.


What mortgage lenders offer buy-to-let mortgages for first-time buyers?

There are many mortgage lenders offering first-time buyer buy-to-let mortgages, including some familiar names from the High Street. However, not all lenders can meet every person’s needs. Therefore, it is wise to hire an independent broker’s services.

We can help. We work with brokers who use a holistic approach to finding the right provider for you.


Talk to a First-Time Buyer Buy-to-Let Mortgage Expert

Finding the right lender to offer you a mortgage buy-to-let as a first-time buyer can be challenging. The experts we work with are at hand to approve your mortgage within 24 hours of submitting your mortgage application.

They can access the market to pick the best deals from different lenders. Some contracts might not even be available to the general public.

Send us an enquiry or call to speak with an expert mortgage advisor to kickstart your property investment journey as a first-time buyer.

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