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If you're a first time buyer considering a Buy to Let property, it's important to weigh up the pros and cons. We explain the benefits and the extra costs and risks of being a Buy to Let first time buyer.
Yes, first time buyers can get a Buy to Let mortgage. However, it can be more tricky as many lenders won’t offer Buy to Let first time buyer mortgages. And for a lender to offer you a Buy to Let first time buyer mortgage, you may need to:
Read on for more information on Buy to Let first time buyer mortgages.
The idea of buying a Buy to Let before you’ve bought a home to live in does sound odd, especially when you factor in the need for a substantial deposit, the higher stamp duty and mortgage costs and the tax on rental income.
However if you can’t afford to buy where you live but have savings and a good income it may be a viable option, especially if you can get better yields than interest rates on savings. Plus, you may benefit from the property growing in value in the longer term.
| Pros | Cons |
|---|---|
| Getting on the property ladder sooner | Getting a Buy to Let first time buyer mortgage can be more difficult. Plus, Buy to Let mortgages require bigger deposits and are usually more expensive. The amount you can borrow depends on how much you can rent the property out for. |
| Generating rental income | Buy to Let mortgages are usually interest-only so you’ll need a plan of how to pay the mortgage off. |
| Benefit from rising property prices | Your stamp duty bill will usually be higher as you won’t qualify for first time buyer stamp duty relief |
| High demand for rental properties in many areas | You’ll have additional costs and responsibilities of being a landlord. |
Get fee-free Buy To Let mortgage advice from award-winning mortgage brokers L&C
Get fee free mortgage advice from our partners at L&C. Use the online mortgage finder or speak to an advisor today.
There are a number of advantages of Buy to Let for first time buyers including:
If you can’t afford to buy where you live, investing in a Buy to Let elsewhere in the country can be a way of buying a property while you’re still renting. For example, if you’re renting in London, you might choose to buy a property away from the capital if it’s affordable. Find inspiration in our guide to the Cheapest places to buy a house in the UK.
By choosing the right property in the right area, you may be able to make a healthy return on your investment – this is known as a property’s rental yield. Average yields in the UK are roughly 5%. And 5-8% is seen generally seen as a good rental yield. Click here to jump to how to calculate a rental yield.
You may consider investing in a house of multiple occupation (HMO) or student accommodation for higher rental income, although that comes with added responsibilities and costs.
If you’re struggling to afford to buy a home to live in, when you see property prices rising it can make you feel like you’re getting even further away from home ownership. But by buying a Buy to Let property, in theory its value may increase over time which means you’ll build equity in the property. That said, there is no guarantee that property prices will go up.
By doing your research carefully and investing in a Buy to Let in the right place, you may find there’s a lot of demand for your property from tenants.
Getting a Buy to Let mortgage works differently to getting a residential mortgage. Here’s how it works:
As a first time buyer, your Buy to Let mortgage options are likely to be limited because many lenders will require you to own your own residential property, potentially for at least 6 months, before they’ll offer you a Buy to Let mortgage. While some lenders just require you to own a property, so you could own another Buy to Let, and be in rented accommodation.
However, some lenders including NatWest and Barclays offer Buy to Let mortgages to first time buyers, although you’ll need to meet their lending criteria.
So if you’re looking for a first time buyer Buy to Let mortgage it’s important to speak to an expert mortgage broker. They’ll explain which lenders are most likely to lend to you and find the best Buy to Let mortgage deal for you too.
Get fee-free Buy To Let mortgage advice from award-winning mortgage brokers L&C
Get fee free mortgage advice from our partners at L&C. Use the online mortgage finder or speak to an advisor today.
The minimum deposit for a Buy to Let mortgage is usually at least 20-25%. However, a lender may require a higher deposit if you’re a first time buyer.
By comparison, if you’re buying a property to live in the minimum deposit is usually 5%. Here’s an example of the deposit you’ll need for different property prices.
| Property purchase price | 20% Buy to let mortgage deposit in £ | 5% Residential mortgage deposit in £ |
|---|---|---|
| £200,000 | £40,000 | £10,000 |
| £300,000 | £60,000 | £15,000 |
| £400,000 | £80,000 | £20,000 |
The amount you can borrow on a Buy to Let mortgage is based on how much rent the property can generate versus the cost of the mortgage. Lenders usually require your expected rental income to meet at least 125% of your mortgage payments.
For example, if your mortgage costs you £800 a month, you’ll need to receive at least £1,000 each month in rent. The below calculator gives an estimate of how much you can borrow depending on the rent you can raise.
If the rental valuation isn’t high enough, you may need a bigger deposit. However, some lenders may allow landlords to use their own disposable income to meet any rental income shortfall. While some lenders may accept a guarantee from a guarantor. But it’s a good idea to discuss your options with a fee-free mortgage broker.
If you’re not sure how much rent you’ll generate on the property you are thinking of buying, you can use our Rent Calculator to get an idea of how much rent you should charge based on your property type, location and local demand.
You’ll need to meet other criteria to be eligible for a Buy to Let mortgage. For example, lenders may require you to have a minimum salary of £20,000- £25,000.
Buy to Let mortgage rates are typically higher than if you’re taking out a residential mortgage. Lenders consider rental properties riskier because as a Buy to Let mortgage borrower, you’re relying on rental income to cover the mortgage. And if your tenants don’t pay the rent or your property lays empty, it could make it harder for you to make your repayments.
And although some Buy to Let mortgage rates may be available at rock bottom levels, these can come with extremely high arrangement fees. So it’s important to explore the mortgage costs as early as possible in the process. Stay up to date with our guide to the best Buy to Let mortgage rates this month.
Looking for a Buy to Let first time buyer mortgage? Get fee-free mortgage advice from award-winning mortgage brokers L&C
Most Buy to Let mortgages are taken out on an interest-only basis, this means that your monthly mortgage payments cover the interest on the loan, you won’t pay off any of the capital you borrowed.
So you’ll need to have a plan of how to pay it off. You may plan to sell the property to do this. Although if the property has dipped in value, the amount you sell it for may not be enough to pay the mortgage off.
However, you can take out repayment Buy to Let mortgages, which means you’ll be chipping away at the capital you’ve borrowed too and will ultimately pay the mortgage off. Although repayments will be higher. So speak to a fee-free mortgage broker about your options.
Get fee free mortgage advice from our partners at L&C. Use the online mortgage finder or speak to an advisor today.
If you’re a first time buyer and apply for a Buy to Let mortgage, the lender will check your credit report. This is standard when you apply for any type of mortgage as the lender will want to check your credit history when determining whether or not to lend to you.
What’s included in your credit report not only affects whether or not you’ll get a mortgage but it can also influence the mortgage rate you’re offered and the loan amount. So make sure you boost your credit score as much as you can. Read more in our guide 11 Tips to improve your credit score for a mortgage
To apply for Buy To Let first time buyer mortgages you’ll need:
First time buyers can usually pay less stamp duty, thanks to first time buyer stamp duty relief. But you only qualify if you’re buying a house to live in, not to rent out. So Buy to Let first time buyers could face paying thousands of pounds more in stamp duty.
To illustrate, here’s how much stamp duty you’ll pay as a first time buyer if you’re buying a home to live in vs a Buy to Let first time buyer.
| Property purchase price | FTB stamp duty bill for a home to live in | Buy to Let first time buyer stamp duty bill |
|---|---|---|
| £300,000 | £0 | £5,000 |
| £350,000 | £2,500 | £7,500 |
| £400,000 | £5,000 | £10,000 |
Use our online stamp duty calculator to see instantly how much you’ll pay if you’re a Buy to Let first time buyer.
No, it’s not possible to use a government scheme to buy a Buy to Let. For example:
When you’re weighing up whether you can afford to buy a Buy to Let as a first time buyer there are extra costs you’ll need to factor in.
Get fee free mortgage advice from our partners at L&C. Use the online mortgage finder or speak to an advisor today.
Plus, being a landlord comes with a wide range of legal responsibilities which include:
Before purchasing a Buy to Let as a first time buyer, think about your long term plan. For example, if you’re planning to sell your Buy to Let, hoping to make a profit, and use the proceeds to buy your own home you’ll need to take into account the cost of selling a house. While if you’re planning to keep your Buy to Let and buy another property, you’ll be liable for the stamp duty surcharge on the property you’re buying.
Also, as we explain above, you won’t be able to use government schemes designed to help first time buyers such as a Lifetime ISA or the First Homes Scheme.
The rental yield is calculated by dividing the annual rental income by the purchase price, then multiplying by a 100, to give the gross rental yield as a percentage.
Get fee free mortgage advice from our partners at L&C. Use the online mortgage finder or speak to an advisor today.
Getting any type of mortgage with bad credit may be possible but it will depend on your circumstances. So it’s important to get expert advice from a mortgage broker.
No, if you buy a Buy to Let property as a first time buyer the terms will usually prevent you from living there. If you want to move into your Buy to Let property and you have a Buy to Let mortgage you should speak to your mortgage provider as you may be able to convert it to a residential mortgage.
If you’re ever refused a mortgage, go straight back to your mortgage broker. Don’t just apply with a different lender without getting expert advice first as if you get another refusal it could damage your credit score further, making it even harder to get accepted in the future.
If you buy your first home and your circumstances change, meaning you want to rent it out, you need to contact your mortgage lender. As a short term solution, the lender may grant you a Consent to Let which allows you to let your property, usually for a maximum of 12 months while maintaining your current mortgage.
A more long-term solution is to switch your residential mortgage to a Buy to Let mortgage.
Buy to Let mortgage arrangement fees can be much higher than residential mortgage arrangement fees.
You may be able to pick up a bargain by buying at auction but it comes with added risks. When you buy a house at auction you’ll exchange contracts on the day and need to complete within 28 days. This can be a tight turnaround if you need a mortgage but there are ways around this. Read more in our guide to Buying a house at auction.
HomeOwners Alliance Ltd is registered in England, company number 07861605. Information provided on HomeOwners Alliance is not intended as a recommendation or financial advice.
Mortgage service provided by London & Country Mortgages (L&C), Unit 26 (2.06), Newark Works, 2 Foundry Lane, Bath BA2 3GZ, authorised and regulated by the Financial Conduct Authority (FRN: 143002). The FCA does not regulate most Buy to Let mortgages. Your home or property may be repossessed if you do not keep up repayments on your mortgage.
HomeOwners Alliance Ltd is an Introducer Appointed Representative (IAR) of Seopa Ltd, for home insurance, authorised and regulated by the Financial Conduct Authority (FCA FRN: 313860).
HomeOwners Alliance Ltd is an Introducer Appointed Representative (IAR) of LifeSearch Limited, an Appointed Representative of LifeSearch Partners Ltd, authorised and regulated by the Financial Conduct Authority. (FRN: 656479).
Independent Financial Adviser service is provided by Unbiased, who match you to a fully regulated, independent financial adviser, with no charge to you for the referral.
Bridging Loan and specialist lending service provided by Chartwell Funding Limited, registered office 5 Badminton Court, Station Road, Yate, Bristol, BS37 5HZ, authorised and regulated by the Financial Conduct Authority (FRN: 458223). Your property may be repossessed if you do not keep up repayments on a mortgage or any debt secured on it.
