Can You Get a Buy-To-Let Mortgage as a First-Time Buyer?

Entering the property market as a first-time buyer is an exciting milestone, but it can also feel daunting, especially if your goal is to invest in property through a buy-to-let mortgage. While traditionally seen as an option for experienced homeowners, buy-to-let mortgages are available to first-time buyers, though they come with unique considerations.

What is a Buy-To-Let Mortgage?

A buy-to-let mortgage is designed specifically for purchasing property to rent out to tenants. Unlike residential mortgages, which are assessed based on your income and personal financial situation, buy-to-let mortgages focus primarily on the expected rental income the property will generate. Lenders use a rental coverage ratio, typically requiring the rental income to cover at least 125% to 145% of the mortgage repayments. This ensures that the property remains financially viable even in times of fluctuating rental demand or interest rates.

Key Considerations for First-Time Buyers

While it is possible to secure a buy-to-let mortgage as a first-time buyer, there are several critical factors to consider:

1. Higher Deposit Requirements

Buy-to-let mortgages typically require a larger deposit than standard residential mortgages, often around 25% or more of the property's value. Some lenders may even require a 30-40% deposit, especially for first-time buyers who have no prior property ownership history. Building sufficient savings is crucial to meet these requirements.

2. Affordability Assessments

Lenders will assess whether the potential rental income is sufficient to cover the mortgage repayments, typically requiring the rent to be at least 125% to 145% of the loan repayments. Additionally, many lenders set a minimum personal income threshold, commonly around £25,000 per year, to ensure borrowers can manage financial commitments even in case of rental voids.

3. Limited Lender Options

As a first-time buyer, you may face a narrower pool of lenders willing to offer buy-to-let mortgages. Many lenders prefer applicants who already own a residential property, as this demonstrates financial stability and mortgage repayment history. However, some specialist lenders cater specifically to first-time buyers looking to invest in rental properties.

4. Higher Interest Rates

Buy-to-let mortgage rates tend to be higher than standard residential mortgage rates, reflecting the perceived risk by lenders. As a first-time buyer, you may face even steeper rates, making it essential to compare available mortgage products and seek professional advice to find the most competitive deal.

5. Additional Costs to Consider

Beyond the deposit and mortgage repayments, first-time buy-to-let investors must factor in additional costs, such as:

• Stamp Duty: Buy-to-let properties incur a higher rate of Stamp Duty, even for first-time buyers.

• Letting Agent Fees: If using an agency to manage tenants, expect to pay 10-15% of monthly rental income.

• Property Maintenance & Repairs: Budget for routine maintenance and unexpected repairs to keep the property in good condition.

• Rental Voids: Factor in periods where the property may be vacant between tenancies, as mortgage payments will still need to be met.

Tips for First-Time Buyers Investing in Buy-to-Let

1. Conduct Market Research

Understanding the rental market in your chosen area is essential. Research rental demand, property prices, tenant demographics, and average rental yields to ensure your investment is financially viable. Consider using online property platforms and consulting with local estate agents for insights.

2. Seek Professional Mortgage Advice

Working with an FCA-regulated mortgage adviser who specialises in buy-to-let mortgages can help you navigate lender requirements and secure the most suitable deal. Mortgage brokers can compare different lenders and identify options tailored to first-time buyers.

3. Consider a Guarantor Mortgage

If you’re struggling to meet affordability requirements, some lenders may allow a guarantor mortgage, where a family member agrees to cover repayments if you are unable to. This can improve your chances of mortgage approval.

4. Be Prepared for Investment Risks

While buy-to-let properties can be a lucrative investment, they come with risks, such as:

• Fluctuating property values that could impact your long-term returns.

• Interest rate increases, leading to higher monthly repayments.

• Tenant issues or rental voids, affecting cash flow.

Ensure that your financial plans account for these potential challenges and that you have contingency funds in place.

Final Thoughts

Getting a buy-to-let mortgage as a first-time buyer is possible, but it requires careful planning, a strong financial foundation, and an understanding of lender requirements. Higher deposit requirements, affordability checks, and additional costs mean that preparation is key.

If you're ready to start your property investment journey, consult with a mortgage professional to discuss your options.