Becoming a landlord for the first time can be an exciting prospect. 
 
Can you get a buy to let mortgage if you are a first time buyer? The answer is yes! 
 
To become a first time landlord, the banks do want to ‘price the risk’ and make sure that the proposition is sound and robust for them and you, so as you would expect there are a few hoops to jump through. 
 
Many lenders (to first time landlords) would like to see you owning your residential property first. It is all about risk for the lender. As a first time buyer they will see you as a higher risk to lend to just because you have no history of making mortgage payments. 
 
The lenders attitude is that Buy To Let is a business and so here are some hints and tips to help you to manage your new BTL first time business, and secure that funding from the mortgage providers. 
 
Firstly, be clear on your own strategy. There are so many things to consider including what type of property to buy, what area is good to invest in, where to find tenants and of course where do you start when it comes to financing your purchase? 
 
An important consideration is what deposit can you put down. As a rule of thumb, the higher the % deposit, the better the mortgage rate. 
 
Most lenders want to see that you are prepared to commit at least a 25% deposit for a buy to let property. If you can invest an even higher deposit, the number of lenders and access to rates will also increase, too. 
 
Secondly, will you be managing the property yourself or will you have an agent to do this? If you have an agent managing the property for you, what will the monthly costs for this be? If you will be managing the property yourself, do you live far from it? If something was to go wrong and you live 2 hours away, how could you fix an issue quickly? Do you know tradesmen in the area such as plumbers and electricians? All things to consider once during your buying process. 
 
Next, factor in costs. The BTL mortgage will possibly include various costs such as valuation fees, lenders application fees (which in some instances can be added to the mortgage), legal fees and stamp duty. 
 
And then of course there is the subject of tax which is applicable on the rental income so it is worth seeking tax advice from an accountant to outline what these costs would look like. 
 
Sound financial planning; What about life insurance and property insurance? 
 
If you were to pass away, what would you like to happen to the property. Would you want your family to have the added stress of evicting your tenants to sell the property to pay for the mortgage? 
 
Life insurance can alleviate this by paying off your mortgage. 
 
What about if your tenant stops paying their rent? Can you still personally meet the monthly mortgage payments? Landlord insurance can ensure if the tenant stops paying, that the rent is covered for a limited period of time giving you further peace of mind. 
 
And for freehold properties, there is the standard condition that the mortgage lender would require the borrower to have buildings insurance in place at exchange of contracts. 
 
Lastly, what rent can you receive from the property? Do your research by looking at sites like Rightmove or Zoopla or speak to local letting agents in the area you are looking to purchase. 
 
How much can you borrow? Lenders will use rent as a way to gauge your borrowing potential meaning your income is not always included in the mortgage equation. In fact, some lenders have no minimum income required for buy to let mortgages – although certain caveats do apply in order to qualify for these arrangements. 
 
What if the rent does not meet the lending requirements? We know the lenders who will allow ‘top slicing’, meaning your income is included in the calculation for the lending potential. 
 
Have you heard about the ‘stress test’? Most lenders will want to see the rent between 125% and 145% of the mortgage payment. 
 
Note – all of the above is just a summary overview of the world of BTL mortgage planning! 
 
As you can see, the buy to let purchasing process can be a complex one. 
 
However, at H D Consultants we don’t only have circa 30 years of mortgage broking experience, and access to hundreds of lenders and thousands of mortgage products, but we are also long established landlords ourselves so we have personally been through the process of buying our first buy to let, and building our own portfolios too. 
 
Let us help you build your property empire. We can hold a full financial review with you, we can give you an idea of mortgage and insurance costs, and we can also provide a full financial review on any existing policies you might have in place. 
 
Start the initial research process now and contact me at victoria@hdconsultants.net 
 
Victoria Bennett 
Mortgage Consultant 
07305 396 811 
 
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