Purchasing your first buy to let
However, it is important to do some research and be aware of some of the factors that can influence the outcome. Most people know about being a first time buyer for residential property, but what you need to know about being a buy to let first time buyer is not quite so obvious. Our expert team are always happy to provide information and advice for a buy to let mortgage first time buyer.
The mortgage basics
In the past, a buy to let mortgage could be easier to get than a residential mortgage because the rental income was seen as relatively sure-fire source of income, enabling the buyer to keep up the payments. In addition, the mortgage products were often interest only, so the repayments were not as high. Today, some lenders can be a little concerned that someone who appears to be a buy to let first time buyer may be purchasing the property ostensibly to rent out but then ends up living in it themselves.
Lenders will want to know that the purchased property will definitely be rented out. If you want to buy a property and then live in the property, you will need to get a residential mortgage. However being a buy to let mortgage first time buyer is perfectly achievable if you genuinely plan for the property to be occupied by tenants.
Options when you are purchasing your first buy to let
- They may also ask for a higher deposit on the property, or expect to see an increased rental income against mortgage payment ratio. Having an experienced adviser on-side will make getting through this process far less stressful.
- Having to provide a larger deposit may be a significant obstacle for some buyers. However, there are always other options to consider, such as purchasing the property in a joint arrangement with someone close to you, such as a parent.
- Another option may be to look at a guarantor mortgage. With a guarantor mortgage, parents or even your grandparents can be part of the mortgage agreement and pledge to guarantee that the repayments will be made. If you have the support of your family and have researched and planned accordingly, this can be a workable solution.
Costs and deposits
There will be fees in valuing the property, arranging the mortgage and there will also be costs associated with energy and gas safety certificates that need to be arranged before a property can be let. The property may also need to be cleaned or repaired and it may not be occupied for 52 weeks of every year, so there needs to be some cash available to cover the mortgage and other costs if the property is sitting empty.
Then there is the issue of stamp duty. Stamp duty is essentially a tax paid to the Government on the price of the property and there is no avoiding it. There is a discount for first time residential buyers, but you will not be entitled to this if you are buying for the purpose of letting. For residential buyers, if the property is worth less than £300,000, then there won’t be any stamp duty to pay. If the property is worth more than £300,000 and less than £500,000, you will pay 5 per cent of the amount in excess of £300,000.
If you're purchasing your first buy to let property, then there is no discount, but at least you will not have to pay the additional 3 per cent required from buyers who already own buy to let property. Purchasers who already have rental properties pay 8 per cent stamp duty on additional purchases.
You should also be aware that the tax situation has changed somewhat, with increasing restrictions with regard to off-setting mortgage interest costs against your tax liability. Our expert team can provide further information and advice in this area.
Whilst there are some complexities in the process, working with expert brokers who know the lending market inside out can ensure that everything runs as smoothly as possible. Please contact us and we'll be happy to provide further help and advice.
Because we play by the book we want to tell you that...
Your home may be repossessed if you do not keep up repayments on your mortgage.
There may be a fee for mortgage advice. The actual amount you pay will depend upon your circumstances. The fee is up to 1.5%, but a typical fee is 0.3% of the amount borrowed.