Are first-time buyers allowed to get a buy-to-mortgage?

Yes, it’s certainly possible for first-time buyers to get a buy-to-let mortgage, however, because you do not currently own a property, mortgage providers will view you as higher risk, there are therefore, fewer options available, and the criteria and affordability calculations are different to mortgages for existing homeowners.

If you’re a first-time buyer applying for a mortgage with another homeowner, you will have even more options available to you compared to applying on your own. It’s worth mentioning that adding a second applicant to the mortgage who already owns a property may result in you paying a higher level of stamp duty.

How does a first-time buyer buy-to-let mortgage work?

For existing homeowners, the affordability calculations are predominantly based on the estimated rental income of the property.

The buy-to-let mortgage affordability assessment for first-time buyers is different, and the affordability checks are often similar to a regular residential mortgage. Some lenders’ policy may state they will consider lending on a buy-to-let basis if you could otherwise afford the mortgage on a residential basis.

Some lenders work off a more hybrid model and use some of the rental income in addition to your earned income but will also factor in your existing commitments, e.g rent, loans, and child care costs.

The criteria differ from standard buy-to-let mortgages, this is because a first-time buyer will have no experience in home ownership, and therefore the banks consider it more risky.

The more stringent affordability assessment is also to prevent ‘back door’ buy-to-let mortgage, whereby a customer takes out a buy-to-let mortgage on a property they intend to live in, usually because they cannot afford a residential mortgage.

The products available are similar to those offered on a regular buy-to-let mortgage and are generally available on a capital repayment or interest-only basis.

Buy-to-let mortgages generally require a minimum deposit of 25%, and mortgage providers carry out rental stress tests on the property which may mean you are required to put a larger deposit down.

Most FTB BTL mortgage lenders will require a minimum £25,000 earned income, excluding the subject property income.

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What rates are available for a first-time buyer buy-to-let?

This will depend on the market conditions at the time of application and the size of the deposit you put down. If you qualify for an FTB BTL mortgage with a mainstream lender, the rates will be similar to those offered to existing homeowners.

The rates themselves are exactly the same as regular BTL buyers, however, less lenders offer them. Therefore by default, they can sometimes be more expensive.

Can I move into my buy-to-let mortgage?

If you move into a property with a buy-to-let mortgage, you will be in breach of your mortgage provider’s terms and conditions. They could increase your interest payable or, at worst, force you to repay the mortgage.

Your best bet is to approach your existing lender to let them know you may need to move into the property and see what implications this has. You may be able to switch to a residential product with them or re-mortgage to another lender.

If you’re mid-way through a fixed-rate product you may have to pay an early repayment charge penalty for switching to another product or lender.

Who offers first-time buyers buy-to-let mortgages?

For first-time buyers buying on their own, there are a handful of high street banks and building societies and a dozen or so specialist lenders. If you are a first-time buyer applying with another homeowner, you will have more options available.

Can I get a guarantor for a first-time buyer buy-to-let mortgage?

If you don’t quite meet the criteria or affordability to secure a first-time buyer buy-to-let mortgage, then adding another applicant may boost your chances of success.

There are a few options; adding a second applicant who is a homeowner or has further income to use for the application will give you a broader spread of options.

The drawback is that on most joint mortgages, both applicants will be named on the title deeds, and therefore the stamp duty may be significantly higher if one of you currently owns a property. 

There is a 3% additional stamp duty charge for people buying second homes or buy-to-let mortgages if they already own a property.

A good alternative that relatively few lenders offer is a joint-borrower sole proprietor buy-to-let mortgage. 

A Joint borrower sole proprietor mortgage is effectively a guarantor mortgage, whereby another customer is used to help with criteria/affordability but not named on the title deeds, therefore, stamp duty is liable for only for the buyer named on the title deeds.

How can Strive Mortgages help?

Buying your first home can be a daunting an overwhelming process, let alone jumping in at the deep end and making your first purchase an investment property. We’re on hand to help you through the whole process, helping you understand the options available to you and give you the best possible chance of success, get in touch with us today.

For more information on first-time buyer mortgages, please contact a member of the Strive team, by emailing [email protected] or call us on 01273 002697.