Buy-to-let mortgage first-time buyer landlords It is possible for landlords that are first-time buyers to get a buy-to-let mortgage on their property investment. A first time buyer with no mortgage on a property can gain access to buy-to-let mortgages with the right research. What are the basics of buy-to-let mortgages? A buy-to-let mortgage is a mortgage secured on a property that is being purchased for the sole purpose of being let out to tenants. In the past, owning a buy-to-let property was the domain of professional landlords, but now many UK landlords are property investors or part-time property developers who need access to buy-to-let mortgages. A first time buyer can get a buy-to-let mortgage too. Set-up costs and mortgage product rates differ for a buy-to-let mortgage compared to standard residential mortgages. The lending criteria for a lender assessing a buy-to-let mortgage application are also different. Buy-to-let mortgages are typically based on personal circumstances and what a lender will deem as the open market rent that can be achieved from letting the property. Although most traditional mortgage lenders in the UK prefer to lend to existing landlords and property owners, it is possible to get a buy-to-let mortgage as a first-time buyer. This can be a good way to get on the property ladder, especially if you live rent-free in another property such as your parent’s home or accommodation provided by an employer. Lenders may view a first time buyer as more of a risk when applying for a buy-to-let mortgage as they have yet to own a property. Not every UK lender will accept a first time buyer applying for a buy-to-let mortgage. Some will only offer buy-to-let mortgages to existing homeowners or property investors. You don’t need to have a residential property to apply for a buy-to-let mortgage. You can apply alone or with up to three people, provided you are not part of a company. What are the lending criteria for a first-time buyer Some of the major high street banks, including NatWest and Barclays, will consider applications from first-time buyers for buy-to-let mortgages at the time of writing. A first time buyer looking for a buy-to-let mortgage can also go to more specialised mortgage lenders in the UK. The lending criteria for a first-time buyer can be very strict. Some lenders will only offer buy-to-let mortgages to first time buyers who live in accommodation that their employer provides. Other mortgage lenders require at least one applicant to be a property owner but will allow a first time buyer as the second applicant. Some of the other main lending criteria for first-time buyers looking to get a buy-to-let mortgage include: Deposit: buy-to-let mortgages require larger deposits than residential A first time buyer will need 20% or even 25% of the property value in place as a deposit on a buy-to-let mortgage. Rental income: for any buy-to-let mortgage, most lenders will require that the rental income of the property covers between 125% and 145% of the monthly mortgage repayments. Applicant income: lenders may be concerned about a first-time buyer’s buy-to-let mortgage’s ability to maintain consistent rental income without any void periods. They may assess other income sources, with some mortgage lenders requiring evidence of an additional income of between £25,000 and £40,000. Applicant age: residential UK mortgages usually have a minimum age of 18. Buy-to-let mortgages often have a higher minimum age of 21. Credit history: this often isn’t as much of an issue with buy-to-let mortgages, as the repayments are expected to be covered by rental income. A first time buyer may pose more of a risk to a mortgage lender, so they may be more stringent on credit history. How much stamp duty do I pay? A first-time buyer is entitled to a discount on stamp duty, as long as the buy-to-let property is valued at less than £500,000. So, a first time buyer would pay no stamp duty on a property valued up to £425,000 and 5% stamp duty on a property valued at between £425,000 and £500,000. It is important to remember that stamp duty rates are 3% higher for additional properties if you invest in a buy-to-let as your first property purchase and plan to buy your own home soon. This surcharge applies even if the additional property will be your main residence. How much deposit will I need for a first-time buy-to-let mortgage? A first-time buyer represents a higher risk to a buy-to-let mortgage lender, so you will be asked for a higher level of deposit on a property. In some cases, a mortgage lender may require a deposit up to a maximum of 60% of the property value. The larger deposit a first time buyer can provide, the more likely they are to be accepted for a mortgage, and the better overall deal they may gain. There are other costs for a first time buyer of a buy-to-let mortgage to consider with running a property. Landlords must budget for insurance, maintenance, repairs, and possible agent fees. Many mortgage lenders also recommend that a buy-to-let property owner should build a surplus of one to two months’ rent into the annual mortgage budget. What are buy-to-let interest rates for first time buyers? Loan-to-value ratios (LTV) for a first-time buyer mortgage are much lower than those for a buy-to-let mortgage. It is possible to secure a residential mortgage on a 95% LTV, whereas buy-to-let mortgages usually start from 75% LTV. If you want a buy-to-let mortgage rather than a home, be sure to consider the differences in cost and how each mortgage is structured.