First-time landlord and first-time buyer... what are my options?

For many property investors, owning your own home before you invest in rental property is a logical progression. Buy-to-let lenders tend to agree, which is why most will only accept applications from existing property owners. But what options are available for a first-time landlord who is also a first-time buyer?

Using an investment rental property as a springboard onto the housing ladder can make sense. Here’s why some buyers look at buy-to-let property before getting a home of their own:

  • Most buy-to-let mortgages don’t fall under Financial Conduct Authority (FCA) regulation. This means that the affordability checks aren’t as rigorous. In many cases, lenders base affordability on the property’s rental income rather than the applicant’s personal income.

    Some lenders have tightened their affordability requirements in recent months, but it is still possible to get a competitive buy-to-let mortgage with only a modest deposit and personal income.

  • A small rental property is typically cheaper than a starter home. Due to the rising age of first-time buyers, many home buyers have family in mind when searching for a place to live. Starter homes need to be new, spacious, and near good schools and amenities.

    There are many suitable buy-to-let properties at the cheaper end of the market. Though inappropriate for a family, a bedsit or small one-bed flat is perfect for a young renter.

  • You need not invest where you wish to live. Many people who live and work in costlier regions, such as London and the South East, cannot afford to buy there. By investing in property to rent elsewhere, they can get on the property ladder without having to relocate.

Between affordability and up-front cost, a cheaper property with a higher rental yields can be an excellent proposition for a first-time landlord. Deposit requirements and income checks are two of the biggest barriers for aspiring homeowners. The broader geographical choice and nature of the buy-to-let market allow first-time landlords  circumvent these obstacles.

First-time landlord mortgages for non-homeowners

Some buy-to-let lenders will consider applications from first-time landlords who do not yet own a property.

How to qualify

  • Up to four applicants considered
  • Minimum income £25,000
  • Minimum property value £50,000
  • Minimum loan amount £25,000
  • Maximum loan to value 75% (Eligibility is dependent on rental and affordability calculations)
  • Maximum age at start of application 69 years
  • Maximum age at the end of the term 75 years 
  • Maximum term 35 years
  • Self-employed applications will be considered with 2 years of accounts available

First-time landlord mortgages for homeowners

If you already own your home, you can access a wider range of products.

How to qualify:

  • Up to 4 applicants’ maximum in most instances
  • Maximum age at application is 80 years
  • No minimum term length; maximum term 40 years
  • Loan at loan to value (LTV) up to 80% (subject to criteria)
  • Minimum loan commonly £25,000
  • No minimum property value, industry standard is between £50,000 - £75,000 (subject to lender criteria) 
  • No maximum borrowing or maximum portfolio size
  • Houses of Multiple Occupation (HMOs) considered
  • Applications from foreign expatriates considered (subject to criteria)
  • Holiday lets considered 
  • Ex-local authority properties considered

It is worth noting that many of the lenders who service existing homeowners also consider applications from non-homeowners who own at least one rental property. So once you own your first property, whether it is a rental property or your own home, your options will broaden substantially.

Borrowing jointly with an experienced landlord

Some lenders who won’t accept applications from non-home owning first-time landlords in single name will consider a joint application, so long as one of the borrowers is an experienced landlord.

People are considered as ‘experienced’ landlords if they own a certain number of rental properties, have owned investment properties for a set period of time acceptable to a lender, or if a notable percentage of their personal income comes from their rental business. Talk to our advisors for clarity on these points because there is nuance on this from lender to lender.

So if you have a friend or relative who runs a successful property portfolio, who is willing to help you start running your own, you will have more options available when you look to apply.

“Am I ready to be a landlord?”

This is the single most important question a first-time landlord can ask him or herself. You have your eye on a property, you fit the criteria and you’re ready to apply for your mortgage – but are you ready to be a landlord?

Landlords have a duty of care to their tenants and are bound by an number of legal obligations. Moreover, like any investment, property isn’t a sure bet; house prices can fall as well as rise, and a rental income is not always guaranteed.

Buy-to-let is usually most successful as a medium-to long-term business, where short-term losses have more time to correct. And those who are willing to invest time and effort into researching the market, planning their purchase and getting to grips with their new duties will have the best results.

Still interested in buy to let? Read our guide to becoming a landlord

This information should not be interpreted as financial advice. Mortgage and loan rates are subject to change.