First Time Landlords
Buy to let can be a tempting investment opportunity. Not only do you own a property which, in a buoyant property market, will steadily appreciate in value, but you could also look to realise a regular income. With the rent set at a rate where it covers the mortgage, it can for some be a double win. But what if you have never owned property before – can first-time buyers enter the buy to let mortgage market?
The short answer is yes, it is possible for a first-time buyer to get a buy-to-let mortgage. However, there are a number of factors to take into account.
First-time buyer buy-to-let mortgage
Although there are lenders who will consider offering a buy-to-let first-time buyer mortgage, you will have fewer options than if you were simply looking for a residential mortgage.
Before they will offer a buy-to-let mortgage, most lenders want applicants to have owned a residential property for a period of time. Others are happy to lend if you already have a buy-to-let mortgage – they just do not want to be the first to say yes.
All this means that the section of the market you can expect to get a mortgage from is reduced – but it does not mean no one will lend to you. A specialist mortgage broker will know how to cut through the red tape.
How much deposit does a first time landlord need?
Expect to be asked to put down a minimum of 25% of the value of the property, up to a maximum of 60%. The bigger the deposit you have, the better your chances of getting a mortgage, and the better deals you will be able to access.
The rent will cover the mortgage anyway; what’s all the fuss about?
The rent will cover the mortgage when the property is let. There may be times it stands empty, and there will be additional costs to cover, too, such as landlord insurance or property maintenance and repair. It is important to have a contingency plan in case you end up with no tenant – or a tenant but no rent – for a period of time. A good rule of thumb is to allow for at least one or two months per year when the property will be untenanted.
How much rent should I charge?
The rent you can charge will depend on the area and the market, but lenders will generally expect to see between 125% and 145% of the mortgage payment covered by rental income, to give them confidence that the mortgage will be affordable.
What about other costs?
You will need to factor in the usual property-buying costs, such as surveys, stamp duty where applicable, and solicitors’ fees. You also need to be on top of the business side of buy to let and make sure the legal and tax obligations of a landlord are met. As well as any relevant property insurance, it is for some advisable to take out landlord insurance. If you intend to use a letting agent rather than managing the property yourself, you will need to factor in their fees. Finally, you need to budget for any repairs, renovations, white goods and furnishings that might be required to get the property up to standard.
What documents are needed for a first time landlord?
At the very least to obtain a buy to let mortgage you will need to be able to provide identification, proof of address and proof of income – pretty much the same documents you would need to provide if you were taking out a first-time buyer residential mortgage. Other documents may also be required depending on your personal circumstances. A professional buy to let mortgage adviser will be able to help you with all the typical requirements.
First Time Landlord Mortgage Advice
At Just Mortgage Brokers we have a team of seasoned professional mortgage brokers with access to deals not always available on the high street. We can help find the perfect first-time buyer buy-to-let mortgage for you. Contact us for a free no-obligation quote to see how we can help you.
I am a first time landlord with bad credit, can I get a mortgage?
The simple answer is yes, it is still possible, however, your options are more limited than they would be if you have a clean credit record. As with any application for a mortgage, lender will look at various things in order to access your abillity to achieve a mortgage, suchh as: income, deposit and the type of bad credit that has occurred. We have access to a number of specialist lenders who are comfortable lending to first-time-buyers who have incurred some bad credit, please contact one of our advisers and we will be able to advise you further.
Can I live in my buy to let property?
No, it is not possible to live in a buy to let property. Lenders do various checks on a regular basis to ensure that the borrowers is not living in the property and if is found that the borrower is, they can take severe action.
Buy to let lenders for first time buyers
There are a few high street lenders that offer buy to let mortgages for first time landlords as well as specialist lenders. At Just Mortgage Brokers, we have great relationships with all these lenders and therefore can give you the best opportunity to secure the most suitable mortgage for your requirements.