24 Apr Buy-to-Let First Time Buyer
If you are a First Time Buyer
If you have not previously owned a property, whether this be a residential or a Buy-to-Let, then you will be classified as a First Time Buyer when applying for a Buy-to-Let mortgage. We receive many enquiries at Trafalgar Square, from new investors who, for various personal reasons, would like to start investing in Buy-to-Let properties before they have purchased a main residence.
When applying for a First Time Buyer mortgage for a Buy-to-Let property, you will need to prove to the lender that you will not move into this property as your main residence. You will also need to prove that you are not simply applying for a Buy-to-Let mortgage because you cannot afford a residential one. This will therefore be taken into consideration by a lender if the property you intend to buy is close to where you currently live or is a bigger property than the one you currently reside in.
Restrictions you may face with a Buy To Let mortgage as a First Time Buyer
You may also face further restrictions when purchasing your first investment property. As you will not yet have any Buy-to-Let experience, you can still get a First Time Buyer mortgage with a handful of specialist lenders.
These lenders will usually base their lending criteria on an affordability calculation, made up of your individual income and expenditure, similar to residential lending criteria, as well as the standard rental stress tests. This means that the maximum loan amount will be calculated using a multiple of your annual income (roughly 4.5x) as well as taking into account any personal living expenses or personal credit.
One of these specialist lenders is NatWest, where First Time Buyer Buy-to-Let mortgages are currently available to individuals with a minimum income of £25,000 per year and a minimum of a 25% deposit.
Don’t stress, being a First Time Buyer is a short-term problem
It is important to remember that being a First Time Buyer is a short-term problem. As soon as you have purchased your first property you will no longer be classed as a First Time Buyer. Once you have lost this label, many more lending options will open up to you including those that do not have a minimum income requirement. Additionally, once you have owned (and in some cases rented) your Buy-to-Let property for six months, you will be classed as an experienced landlord.
Purchasing under a Limited Company name
It is also possible to get a First Time Buyer mortgage in a limited company name. We always recommend that you seek advice from a tax specialist prior to setting up a new limited company, to ensure that this is the best strategy for you going forward and that the structure of the company is suitable for property investment purposes.
As with personal lending, there are some specialist lenders will consider lending to a First Time Buyer for this purpose. Again, this will work on a personal income affordability basis as described above.
One of the lenders operating in this specialist area is Precise Mortgages, who have a range of products available for limited company lending that they will consider offering to a First Time Buyer, as long as they meet their minimum requirements. For those that are unable to meet the minimum requirements of the specialist mortgage lenders, bridging finance is also available to First Time Buyers.
It is possible to purchase a Buy-to-Let as a First Time Buyer
Ultimately, being a First Time Buyer will not stop you getting a Buy-to-Let mortgage. If you are ready to apply for finance for your first investment property, then there are some key steps you can take before you begin to submit offers on properties which will help to make the mortgage application process as easy for you as possible.
We strongly recommend engaging with a mortgage broker, who should consider all your available options and ensure that your property investment strategy fits with the finance options available to you as a First Time Buyer. We have also outlined some further steps you can take in our post on Buy-to-Let mortgages.
If you are a First Time Buyer, please do not hesitate to get in touch with us at Trafalgar Square if you are ready to purchase your first investment property or have any other mortgage related questions.