First Time Landlord Buy-to-Let Mortgage

Should I become a landlord?

You might be thinking about getting a first time landlord mortgage, or you're soon to become a landlord by accident. Maybe you've already got everything sorted and you're just looking to see what the best buy-to-let mortgage for a first-time buyer might be. If you're not sure about becoming a landlord, however, here's an overview of the risks and rewards to help you decide whether it's for you.

Risks:

• Buy-to-let is subject to several taxes, with recent regulatory changes making it more expensive to be a landlord. 
• While you'll want to do everything you can to keep (good) tenants in the property, it's sometimes unavoidable to have your property stand empty for some time. You can minimise the cost associated with this risk by taking out landlord insurance.
• There are lots of different expenses involved in becoming a landlord. You'll likely need to do some renovating before your first tenants can move in, not to mention fire safety precautions, energy efficiency enhancements and all other legal requirements related to letting, such as annual gas safety checks. Don't forget that there will be unexpected expenses during the term of the tenancy as well, with sudden repairs and such potentially costing a pretty penny.
• Buy-to-let is a long-term investment – yes, you will get rent every month, which should make you a profit, but if you want to take your money back out, to pay for retirement for instance, this will involve a lot of hassle. And if house prices drop by too much, you may not even be able to remortgage, let alone sell the property at a profit.
• Potentially worse than no tenants could be a situation where you're dealing with bad tenants who trash the property, refuse to pay rent, won't move out, or all of the above. These legal issues could be costly in terms of both time and effort. You could minimise the chances of this happening by not renting to higher-risk tenant types or going through a trustworthy rental agency.
• If you don't want to involve a rental agency, being a landlord could end up taking a lot of your time, as you'd have to come by to do any repairs and checks, or arrange them with contractors, and generally keep an eye on things. So, before you dive in, ask yourself: how much involvement do I want to have?

Rewards:

• Rental yields should give you a decent monthly income, as strict affordability rules mean that you shouldn't be able to get a mortgage if you're not expected to make a profit. Rent must be at least 125% of your mortgage repayments, or 145% if you are a higher or additional rate taxpayer. This money could be a great addition to your regular or retirement income and give you a cushion in case your regular income falls away unexpectedly.
• The bright side of buy-to-let being a long-term investment is that it can give you long-term security; you should know exactly how much you're getting every month, which would allow you to plan accordingly.
• If you are a basic rate taxpayer or a limited company, you should be able to get some tax relief for your buy-to-let property. Read more about this on the Government's website, as well as some handy tax exemptions that all landlords could be able to profit from. As buy-to-let taxation can change at any time, it’s best to double-check this initial information before you proceed.

Can I get a buy-to-let mortgage?

The most common eligibility criteria for being able to get a buy-to-let mortgage, aside from the required deposit, are a certain minimum level of income and possibly a maximum age (usually 75/80) although this may be less restricted than residential mortgages. Not all mortgages will require these criteria. However, there will be certain requirements such as a deposit that is at least 25% or even 40% of the value of the home – much higher than regular first-time buyer deposits – and the rental cover that could restrict your options.

Additionally, the lender may require you to be able to withstand certain mortgage rate rises (as much as 5.5%) to make sure you won't have to default on the deal. They might even ask you to show that you've been able to pay your personal mortgage off without problem for the last year or so.

At this point, you may be asking yourself: can first-time buyers get a buy-to-let mortgage? The answer is yes, if they find a mortgage that is specifically available to first-time buyers and meet the lender's criteria. Be aware though that very few buy-to-let mortgages will be available to non-homeowners and that mortgage lenders will likely require a large deposit and substantial, steady income.

Note that you cannot get a buy-to-let mortgage for a home you are planning to live in (which would not be a financially savvy move, as regular mortgage rates tend to be lower than buy-to-let rates). If you plan to rent to family members you would need a regulated buy-to-let mortgage, which may come with additional affordability checks.

Should I speak to a mortgage broker?

Mortgage brokers remove a lot of the paperwork and hassle of getting a mortgage, as well as helping you access exclusive products and rates that aren’t available to the public. Mortgage brokers are regulated by the Financial Conduct Authority (FCA) and are required to pass specific qualifications before they can give you advice.