What Lender Criteria Apply to a Buy to Let Mortgage First Time Buyer Applicant?
Lender criteria always vary across the market, and the rules might be a little stricter if you're a buy to let first-time buyer and haven't owned any residential or rental assets before.
However, specialist and niche buy to let mortgage first time buyer lenders will likely be able to help.
Most buy to let first-time buyer lenders will look for:
- A sizable deposit usually of at least 25% of the property value.
- Good income to meet the buy to let first-time buyer affordability metrics.
- Your age - normally, you need to be 18+ and below retirement age.
- A respectable credit rating and a history of responsible financial management.
- Employment details - PAYE employment on a permanent contract is the best option.
Note that these are general criteria, and not meeting one doesn't necessarily mean you won't qualify for a competitive first time buyer buy to let mortgage UK!
However, it does increase the importance of working with an independent broker to negotiate terms on your behalf and match you with the most appropriate buy to let first-time buyer lender.
Can First Time Buyers Get a Buy to Let Mortgage as an Interest Only Deal?
The vast majority of buy to let mortgages are paid on an interest-only basis.
Each month you pay solely the interest owing on the first time buyer buy to let mortgage UK without chipping away at the capital balance originally borrowed on the buy to let first-time buyer mortgage to buy the property.
You must have a plan to repay the loan when the term ends, usually called a repayment vehicle or an exit strategy.
Most buy to let first-time buyer applicants will plan to either remortgage and keep the rental asset or sell it for a profit, using the proceeds to pay back the loan.
How Do Lenders Assess a Buy to Let Mortgage First Time Buyer Application?
Buy to let mortgage first time buyer lenders use different assessment processes than you would find in a residential mortgage application.
The buy to let first-time buyer lender will need to know when the rental earnings potential is and show that the income will be more than sufficient to cover the mortgage costs.
If you're a first-time buyer, a buy to let mortgage for first time buyers UK lender will also focus on your personal income and ensure you have the means to cover the payments if your rental property is vacant.
Therefore, the process feels like a double assessment - you'll need to meet both residential and buy to let first-time buyer mortgage requirements!
What Paperwork Do I Need to Get a First Time Buyer Buy to Let Mortgage UK?
The biggest challenge as a buy to let first-time buyer mortgage applicant is that you don't have a history of keeping up with mortgage payments, which makes the lender's risk higher.
If you provide comprehensive documentation with your application, it can help assure the buy to let first-time buyer lender that you are a viable applicant - including:
- Landlord references if you currently rent your property.
- A full address history of three years or more.
- Wage slips to prove your annual income.
- Six months of bank statements to verify your financial standing.
Your selected buy to let first-time buyer lender will also need to check whether the forecast rental income is viable. They usually need to see a rental income of at least 125% of the mortgage interest, or 145% or higher if you're a higher or additional rate taxpayer.
For example, if you are applying for a buy to let first-time buyer mortgage on an interest-only basis that costs £500 a month, the lender will need to see documents that show the rent will be at least £725 per month.
The best way to do this is to request a rental evaluation from the local lettings agent, although you can also research similar properties in the area to gain a ballpark idea.
Can First Time Buyers Get a Buy to Let Mortgage on Any Income?
Possibly - buy to let mortgage first time buyer lenders will always want to check your financial position before they offer a product.
However, in buy to let mortgages, the primary factor is the rental income you expect to receive from the property. If you can show estimates (or rental income valuations from a local agent) that far surpass the monthly interest costs, your personal income as a buy to let first-time buyer may become less important.
The lender will usually calculate four or perhaps 4.5 times your annual income on a residential mortgage - that figure is the maximum they will lend.
For buy to let first-time buyer mortgages, the lender may ask for a minimum annual income, separately from the rental earnings - this could be £25,000 or thereabouts as a rough indication.
Although your salary isn't always crucial, buy to let mortgage first time buyer lenders have to ensure they lend responsibly and check that you can afford the debt, so they will normally ask for rental projections and personal income details.
What is the Deposit Difference Between a Standard Buy to Let and a Buy to Let Mortgage for First Time Buyers UK?
Standard buy to let mortgage products normally require at least 15% as a deposit, calculated against the home's purchase value.
Lenders can request more and may determine that they will need 20% or 25% as a deposit to accept the risk of lending to a buy to let first-time buyer against a buy to let property.
We explore some of the ways to boost your deposit value below or can advise which buy to let mortgage first time buyer lenders are most likely to accept your application if you have a low deposit value.
Which Buy to Let Mortgage First Time Buyer Products Am I Eligible For?
If you're worried about buy to let mortgage first time buyer eligibility, there are several ways to boost your affordability or secure a buy to let mortgage, even if you fall outside the generic qualification criteria as a buy to let first-time buyer.
Examples could include:
- Guarantor mortgages mean that a guarantor backs up your application and agrees to make any missed payments on your behalf. Some buy to let first-time buyer lenders will accept a lower deposit in respect of the reduced risk. The guarantor doesn't own a share of the property but does feature on the title documents.
- Joint borrower, sole proprietor mortgages - most common where a parent or member of your family helps with the financial cost of investing in a buy to let without requiring any ownership.
Please get in touch if you'd like further advice about either of these options or other buy to let first-time buyer mortgage structures that might strengthen your buy to let application as a first-time buyer.
Can First Time Buyers Get a Buy to Let Mortgage With Bad Credit?
Being a buy to let mortgage first time buyer does put you into a less conventional category since most lenders prefer landlords to have at least two or three years of experience to lend.
You almost certainly need to work with a broker if you also have adverse credit issues since mainstream banks are highly unlikely to offer buy to let mortgage for first time buyers UK in these circumstances.
Revolution Finance Brokers works with several respected bad credit specialists who will consider buy to let first-time buyer applications in various circumstances.
Can first time buyers get a buy to let mortgage with any lender? Buy to let first-time buyer lenders all have different policies, so their decision will depend on the type of credit issues you've had, when they occurred, and whether you've since settled all of your debts.
Minor credit issues such as a late payment a few years ago probably won't have a tangible impact on the approval process, whereas something more severe such as bankruptcy, will be more of a stumbling block.
Does a Buy to Let Mortgage for First Time Buyers UK Apply if I Plan to Live in the Property?
No, buy to let mortgages are designed for homes where the owner rents the residence to a paying tenant - they need to check the rental earnings and use that to decide whether you make enough to cover the mortgage costs. You cannot use a buy to let mortgage for first time buyers UK on a residential home.
In most cases, living in a buy to let property would mean you breach the buy to let first-time buyer mortgage agreement.
Can I Rent Out a Property Without a First Time Buyer Buy to Let Mortgage UK?
Although it's not technically always illegal to rent out a property without a buy to let mortgage, it's extremely important to ensure you have permission from your buy to let first-time buyer mortgage lender.
The worst-case scenario is that you are found to be in breach of your mortgage agreement on buy to let mortgage for first time buyers UK, you could need to pay back the outstanding mortgage in full, the property is repossessed, or you're even charged with fraud.
Can first time buyers get a buy to let mortgage on a cash purchase? This situation changes if you're a cash buyer or own a property outright since you can do what you like.
However, if you have a mortgage secured on a home and wish to start renting it out, you must inform your lender and switch to a buy to let mortgage for first time buyers UK.
That normally means either seeking consent to let or switching your mortgage to an appropriate buy to let mortgage first time buyer product.
Buy to let first-time buyer mortgages tend to be slightly more expensive than residential loans and have higher deposit requirements, but you aren't permitted to rent out a home on a private mortgage without approval.
Are Buy to Let Mortgage for First Time Buyers UK Products Available Through a Limited Business?
Commercial buy to let mortgage for first time buyers UK for rental properties are available, although it might not make it easier to find a mortgage if you're trying to scour the market independently.
Can first time buyers get a buy to let mortgage easily? Most lenders offering a first time buyer buy to let mortgage UK product will require a fairly extensive amount of information to lend to a newly incorporated business, particularly if the owner hasn't had a mortgage before.
The same underwriting policies apply, so you'd need to find a commercial lender that offers buy to let mortgage for first time buyers UK products to limited businesses with a first-time buyer policy that would consider you eligible.
As a niche buyer on two fronts, it can be tricky to find a competitive buy to let mortgage first time buyer product - an independent, whole-of-market mortgage brokers is an essential support system to ensure you find the right buy to let first-time buyer lender and the best product available.
