For many, the homeownership journey begins with a residential mortgage and the dream of living in their place. However, some folks set their sights on investment early, looking to purchase a buy-to-let property for rental purposes as their first step into the property market. But is buying an investment property as your first home feasible? Let’s delve into this topic with all the insights you need about venturing into rental property ownership as a first-time buyer.
Can your initial property purchase be a buy-to-let?
In short, yes. However, it’s different from the usual path taken by most in the UK, and it involves navigating a somewhat complex process. Climbing onto the property ladder has become increasingly challenging for first-time buyers, leading the government to establish various schemes aiding new homeowners in their quest for keys to their first home. But there are no such schemes tailored for aspiring first-time landlords. Consequently, purchasing a buy-to-let property as your first home can pose additional hurdles, as lenders often perceive first-time buyers as higher risks and are cautious in their lending criteria.
Should you opt for a buy-to-let as a first-time buyer?
Typically, first-time buyers secure their primary residence before delving into rental property ownership. Having an existing residential mortgage makes it easier for lenders to consider offering a buy-to-let mortgage for an investment property. Becoming a landlord entails significant responsibilities, and having prior experience living in and maintaining a property can be beneficial. However, there are scenarios where starting with a buy-to-let property makes sense. For instance, if you’ve rented for an extended period and understand the nuances of property management, or if you’ve inherited a property without mortgage obligations, or if you reside with a partner not named on the mortgage. Ultimately, the decision hinges on your unique circumstances and readiness to embrace landlord responsibilities.
Navigating the buy-to-let path as a first-time buyer
Securing a buy-to-let mortgage as a first-time buyer requires finding a lender willing to extend such financing. Many lenders mandate prior residential mortgage experience and prefer applicants to be current homeowners. Alternatively, having landlord experience can bolster your case. While most lenders demand at least 12 months’ experience as a residential buy-to-let landlord, working with a mortgage broker can help identify lenders amenable to first-time buyers, albeit possibly at higher rates and with additional requirements.
Deposit requirements for first-time buyers
Buy-to-let lenders typically stipulate a minimum 25% deposit based on the property’s value. As a first-time buy-to-let buyer, demonstrating substantial savings to cover potential rental voids may also be necessary. Additionally, understanding the mortgage structure, usually interest-only, is crucial. While this leads to lower monthly payments and higher rental profits, it necessitates proving the ability to repay the mortgage in full at the term’s end, often through property sale.
Exploring guarantor options
Although more common in residential mortgages, some lenders entertain guarantors for first-time buy-to-let buyers who don’t meet all requirements. Each lender’s approach varies, so consulting directly with lenders or seeking professional advice is essential. Unlike residential mortgages, buy-to-let affordability centres on projected rental income, making a guarantor less pivotal but still a potential option.
In conclusion, stepping into buying an investment property for first-timers
While unconventional, obtaining a buy-to-let mortgage as a first-time buyer is feasible. However, it entails significant responsibilities and financial considerations. Conduct thorough research, seek professional advice, and ensure financial readiness before embarking on this investment journey. With the proper preparation and understanding, starting with a buy-to-let property can be a strategic move for earning passive income and entering the property market.
Excited to discover more? Reach out to our experienced advisers, and we’ll provide an overview of available options while delving into the best-suited solution for you. Call us on 0333 335 6595 or message us to get started!
