Buy to Let Mortgage for First Time Buyer
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First Time Buyer Buy to Let
From the outside, becoming a Buy to Let landlord looks like an excellent investment opportunity – not only will you receive rental income from tenants, but you will own an asset that should only gain in value over time. Rents set at a rate to cover your mortgage, plus a margin on top for costs and profit, can make Buy to Let seem like a no-brainer.
But what if you have never owned a property before? Is it possible for a first time buyers to enter the Buy to Let market? We know that it is indeed possible, and being a first time buyer should not put you off. You’ll just need to be prepared and understand all the factors to be taken into account.
First Time Buyer Buy to Let Mortgage Information
How much deposit does a first time landlord need?
As, in the eyes of a mortgage lender, you present a greater risk, you will be asked for a larger than average level of deposit. Expect to need at least 25% of the property’s value, although in some cases a lender may require a deposit up to a maximum of 60%. The positive spin on this is that the larger the deposit you can provide, the more likely you will be accepted for a mortgage, and the better the deal you will be able to get.
The rent will cover the mortgage anyway – what’s all the fuss about?
It’s true that rental income should cover the mortgage and then some extra – but only if all goes to plan. There are likely to be times when the property will stand vacant, leaving you with no income from it during that period, and you must always budget adequately for all the associated costs you will face as a landlord – insurance, maintenance, repairs, possible agent fees, etc. It’s a good idea to allow for a contingency in the event that your property is empty for a time – or your tenant is late to pay or defaulting on rent – and to build in a month or two’s rent surplus into your annual budget.
How much rent should I charge?
The amount of rent you will be able to charge of any particular type of property will largely depend on the area in which it is based and the prevailing market rates at that time. However, lenders will expect to see a rent of around 125%-145% of the mortgage payments, so they can feel confident that you will be able to afford the mortgage.
What about other costs?
As with any property purchase, there are a number of costs connected with buying a Buy to Let, and few above what you’d expect for a residential mortgage. The usual costs are for the survey, solicitor’s fees and stamp duty. You may also have to pay mortgage arrangement fees, according to the deal you get.
On top of this, you will need to take out landlord insurance in addition to the usual building insurance, and make allowances for agency fees if you do not want to administer the let and deal with tenants yourself. And, of course, you will need to budget for property maintenance, repairs, decoration, white goods and furnishings that will be necessary to bring the property up to the appropriate standard.
What documents are needed for a First Time Landlord?
The necessary documents to get a Buy to Let mortgage are mainly the same as those you would need if you were applying for a conventional residential mortgage – a valid form of ID, a proof of address and proof of income. You might need to provide other documents according to your personal circumstances (for example, and up-to-date copy of your contract if you are working as a contractor), but a professional Buy to Let mortgage advisor will be able to take you through all the requirements.
First Time Landlord Advice
Our team at The Mortgage Centres is able to offer you in-depth knowledge and advice gained from many years handling specialist mortgages across a huge range of circumstances, and will have access to mortgage products and deals that you won’t find on the high street. Get in touch to arrange a free, no-obligation consultation.
I am a First Time Landlord with Bad Credit. Can I get a mortgage?
As with all kinds of mortgages, yes, it is possible to obtain a Buy to Let mortgage if you have a bad credit record, but your options will be more limited than if you had a clean credit history. Lenders will take many factors around your application into account, including your income, the level of deposit provided, the type of bad credit incident itself and the length of time since it occurred. As whole-market advisors, we have access to a range of specialist lenders who look at the wider picture and are willing to lend to first time buyers with bad credit – please get in touch with one of our team, who will be able to give you proper advice according to your individual circumstances.
Can I live in my Buy to Let Property?
There is a quick answer to this, and it is unfortunately no. It is not possible to live in a property you have bought in an agreement designed for the sole purpose of it being for let to tenants. Lenders do make checks to ensure that borrowers are not living in the property, and will take severe action if it is found to be so.
Buy To Let Lenders For First Time Buyers
It has usually been the case that you would need to approach a specialist lender in order to obtain a Buy to Let mortgage for a first time buyer, but there are now a few high street lenders offering these kinds of products as well.
Our experienced team at The Mortgage Centres enjoys great relationships with all kinds of lenders – both mainstream and specialists – and will be able to identify exactly the right lender and product to meet your individual needs.