Learn how to secure the best first time buyer buy to let mortgage. Discover deposit requirements, rental coverage rules, and expert tips to get approved faster.
Introduction
For many aspiring investors, purchasing their first rental property is an exciting step toward financial independence. But securing a first time buyer buy to let mortgage can be more complex than a standard residential loan. Lenders apply stricter criteria, deposits are usually higher, and affordability is based on rental income rather than personal salary. Understanding how these mortgages work and how to position yourself for approval is key to success.
This guide explains everything first time landlords need to know about buy to let financing, from eligibility requirements to smart strategies for finding the right mortgage deal.
How Buy to Let Mortgages Differ from Residential Mortgages
While both buy to let and residential mortgages involve borrowing to purchase property, the way lenders assess risk and affordability is very different.
A residential mortgage is based mainly on your personal income and expenditure. Lenders want to know that your salary comfortably covers monthly repayments.
A buy to let mortgage, however, is designed for investment. Instead of focusing on your salary, lenders look at the potential rental income from the property. They calculate something called the Interest Coverage Ratio (ICR), which measures how much rental income exceeds the mortgage interest payments. Typically, lenders want rental income to cover between 125% and 145% of the monthly interest payments, depending on your tax status.
Buy to let loans are often interest only, meaning you pay the interest each month and repay the capital at the end of the term. This keeps monthly costs lower and helps investors maximise rental yield. However, you’ll need a clear repayment strategy.
Deposit Requirements for First Time Buyers
The biggest challenge for most new investors is the deposit. Buy to let mortgages usually require at least 25% of the property’s value upfront, though some lenders will accept as little as 20% if your application is strong.
As a first time buyer, you may be asked for a slightly higher deposit, sometimes up to 30%, because lenders see you as higher risk without a previous mortgage history. A larger deposit not only strengthens your application but can also unlock better interest rates and improve your long term return.
It’s worth noting that first time buyers are not eligible for first time buyer stamp duty relief when purchasing a buy to let. All rental properties are subject to the 3% Stamp Duty Land Tax (SDLT) surcharge, so this cost should be factored into your budget. You can find the latest rates on the UK Government website.
Rental Coverage and Affordability Checks
Lenders need to see that your rental income comfortably covers your mortgage payments. This is known as rental stress testing.
For example, if your mortgage interest payments are £800 per month and your lender requires 145% rental coverage, the property must generate at least £1,160 in monthly rent.
If the rent falls short, you might need to increase your deposit, choose a property with stronger rental potential or extend your mortgage term to lower the monthly payments.
Professional advice from the property specialists at 365 Invest can help you assess rental yields before applying, ensuring your figures meet lender expectations.
Location is also a key factor when applying for a buy to let mortgage, as lenders often consider the area’s rental demand, local economy, and potential for long term growth.
Credit Score and Personal Income Considerations
Even though buy to let affordability is mostly based on rental income, lenders will still check your personal finances.
You’ll need a good credit history, minimal unsecured debt, and evidence of stable income. Some lenders also require a minimum personal income, usually around £25,000 per year, to show that you can handle costs during any empty rental periods.
If your credit profile needs work, take time to improve it before applying. Register to vote, keep credit use low, and make all payments on time to boost your chances of approval.
Using a Limited Company to Buy Your First Buy to Let
Many investors now choose to buy properties through limited companies, known as special purpose vehicles (SPVs). This structure can offer tax advantages, especially for higher rate taxpayers, because mortgage interest remains a deductible business expense.
Not all lenders accept limited company applicants who are first time buyers, but specialist lenders do. They may charge slightly higher rates or arrangement fees, and the application will require more documentation.
Common Pitfalls for First Time Buy to Let Investors
Many first time investors underestimate how complex buy to let financing can be. Common mistakes include choosing the wrong property type, such as HMOs or flats above shops, which some lenders avoid. Others overlook ongoing costs like maintenance, insurance, and management fees, or apply to lenders who don’t accept first time buyers. Another frequent issue is misjudging rental coverage and failing lender stress tests.
Being well prepared and understanding what lenders expect will help you avoid these issues and secure the right deal faster.
To learn practical ways to manage your first investment and maximise returns, take a look at our investment property for beginners guide, which covers essential tips for first-time landlords.
Finding the Best First Time Buyer Buy to Let Mortgage
When looking for a first time buyer buy to let mortgage, it’s important to compare offers from both mainstream banks and specialist lenders. Rates, fees, and criteria can vary widely, so professional support makes a big difference.
At 365 Invest, our experts work closely with lenders to help new investors secure competitive mortgage deals that match their goals. Whether you’re buying in Manchester, Liverpool, or another major investment area, our team can guide you from application through to completion.
If you’re ready to explore every stage of becoming a landlord, from choosing the right property to managing your first tenants, our complete guide to first time buy to let offers a detailed overview tailored to new investors.
Conclusion
Securing a first time buyer buy to let mortgage takes planning, a solid financial profile, and a clear investment strategy. By understanding how buy to let loans differ from residential mortgages, meeting deposit and rental requirements, and avoiding common pitfalls, you can set yourself up for long term success.
To start your journey, speak to the experts at 365 Invest. Our team can help you find the right mortgage options and identify high yield investment opportunities across the UK.
