Buy to let mortgages for first-time buyers

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About Martin Alexander

Martin has been a mortgage advisor for over 15 years. Check to see if you qualify or give us a call on 0800 195 0490. mortgage reviews

Getting on to the property ladder for the first time has become difficult in recent times. Purchasing a buy to let as your first property can be even more difficult. The main reason why buy to let mortgages for first-time buyers can be difficult is that lenders often see first-time buyers as high risk.

That said, lenders do offer buy to let mortgages for first-time buyers under certain circumstances. Trying to find suitable lenders can also prove difficult. If you approach an unsuitable lender, it can result in you being declined. Not only is this a waste of your time and money, but can also damage your credit score.

Buying your first property is an experience in itself, so we’d highly recommend having an advisor on board. Our specialists can find you the best deals available and clarify anything you don’t quite understand.

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Are buy to let mortgages for first-time buyers advised?

It’s usually the norm for first-time buyers to purchase their own home before becoming a landlord. Once you’ve got your first mortgage, securing a buy to let mortgage can be easier. This is because lenders can see your mortgage conduct and whether or not payments have been made on time.

Purchasing a buy to let property can be a great investment, but being a landlord entails a lot of responsibility. Having the knowledge and experience of owning your own home first, can provide you with an invaluable insight into what you may encounter as a landlord.

On the other hand, you might not need a mortgage for a home, as you perhaps live with parents or a partner. You may have inherited a property that you let to tenants and now want to add to your portfolio. No matter what the reason, investing in a buy to let property can generate you a monthly income.

You can also reverse the roles, as being a landlord before you purchase your first home can give you an insight and experience in property. The income generated from your buy to let can also be used to help purchase your first home.

You may want to purchase a buy to let and move into the property yourself after a few years. You can switch a buy to let mortgage to a residential mortgage. It’s also possible to switch a residential mortgage to a buy to let mortgage. Often enough, your current lender may be happy to do this, depending on your mortgage conduct.

Read more: How to switch to a buy to let mortgage.

Buy to let mortgage rates for first-time buyers

The majority of buy to let mortgage lenders require borrowers to have at least a 20-25% deposit. As a first time buyer applying for a buy to let mortgage, the deposit amount is likely to be higher, but not in every case.

Loan to value ratios (LTV) for first-time buyer mortgages are a lot lower when compared to buy to let mortgages. For instance, it’s possible to secure a residential mortgage on a 95% LTV, whereas buy to let mortgages usually start from 75% LTV. This is another major reason why becoming a homeowner can be easier than becoming a landlord.

Landlords usually choose interest-only mortgages as opposed to repayment mortgages. Interest-only mortgages allow landlords an increased profit on rental income each month. This is because landlords are simply paying interest on the mortgage and not repaying any of the actual loan back. The drawback is that at the end of the mortgage term, you wouldn’t own the property.

The main advantage of having a repayment mortgage is that you’d own the property outright once the mortgage has been fully repaid. The drawback of this is that monthly mortgage payments are higher, limiting your rental profits.

If you want a buy to let mortgage before a residential mortgage, be sure to consider the differences in costs and how each loan is structured. Securing an interest-only mortgage on a residential property is currently not possible.

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Can I use a guarantor for a buy to let?

Using a guarantor for a mortgage is more commonly used for residential purposes rather than property investment. That said, some lenders may consider the use of a guarantor, especially if the assessment falls just short of approval.

It’s important to understand that every lender has a unique mortgage assessment. One lender may approve a buy to let mortgage only with a guarantor, whereas another lender may approve the same mortgage without a guarantor. This is why having an advisor on board can be so valuable.

It’s also important to note that lenders assess buy to let mortgage affordability in a completely different manner to residential mortgages. Underwriters are highly focused on the rental income that a buy to let property can achieve. This is normally at the forefront of whether or not a buy to let mortgage is approved. There are of course other factors, such as the credit score of the applicant, however, potential rental income is a huge factor when it comes to getting a buy to let mortgage.

If you’re still in search of mortgage advice or have some unanswered questions, you can make an enquiry with an advisor below or call now on 0800 195 0490.

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