Buy-To-Let Mortgages For First-Time Buyers Explained
By Azeem S. | Created on 17th March 2025
If you’re a first-time buyer, investing in buy-to-let could be a way to get a foot on the housing ladder and earn extra income while you save for your dream home.
You will need money upfront for a deposit and enough income to cover your mortgage payments if you have no rent coming in. As a first-time buyer, you may need help getting a buy-to-let mortgage and should seek expert mortgage advice to see if it’s right for you.
But if you do your sums and plan your project carefully, buy-to-let can be a worthwhile and profitable first step to homeownership. Some of the most affordable areas to buy property in the London Borough include Barking and Dagenham, where average property prices are around £350,000. With great transport links to attract renters, buying property here could help you to generate a good level of extra income.
Based on our experience advising new landlords, we answer some of the most frequently asked questions about buy-to-let mortgages for first-time buyers.
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Why Do First-Time Buyers Invest In Buy-To-Let Property?
The idea of becoming a landlord before you’ve even purchased a house of your own to live in may sound odd, but there are some excellent reasons why a first-time buyer may decide to invest in buy-to-let property.
You may have a decent income and some savings, but you need more for the deposit on a property where you currently live. Buying-to-let in a cheaper area would give you a foot on the property ladder, a regular income and a home, should you wish to relocate later on.
Despite changes to taxation, which has made buy-to-let less lucrative, returns can still be much higher than from saving accounts and other investments.
Pros & Cons Of Buy-To-Let As A First-Time Buyer
While buying a property to rent out as a first-time buyer has many benefits, there will be lots of new processes and legal requirements to get familiar with. Before you decide whether it is the right decision for you, take a read through our list of pros and cons:
Pros of buy-to-let for first time buyers
High potential rental yields
There is a high demand for rental properties and high rental income can be achieved with buy-to-let properties. For example, the average monthly rent in January 2025 for property in Barking and Dagenham was £1,523 according to the Office of National Statistics (ONS). This was an increase of just over 10% from 12 months earlier.
For first time buyers, rental income can cover the mortgage payments if you’re not ready to pay this from your regular income for your own property. If you are making a good profit, you can also use some of the proceedings towards paying the mortgage for your own home when you decide to buy.
Property appreciation and deposit for your own home
Over time, property value tends to increase. While there can be fluctuations, over a period of 5 years or more, there is a good chance that the property will increase in value. In Redbridge, the average property price was £412,922 in December 2019. Five years later, the average house price had grown to £494,884 (ONS data).
This means buyers would have made an average profit of £81,962 in that period. First-time buyers of BTL property that increases in value have the opportunity to sell the BTL to use the profit for a deposit on another property.
Purchasing a BTL as a first-time buyer can also set you up for financial security. By generating monthly rental income and the potential for property value appreciation, you can start building for your financial future. Your BTL property can help set you up for a financially secure retirement.
Cons of buy-to-let for first time buyers
Higher mortgage rates and deposit
BTL mortgages usually have higher interest rates than standard residential properties and you’ll be required to put down a larger percentage of deposit.
Most BTL mortgage lenders request at least 25% deposit, whereas a mortgage to buy your own home will typically require just 5-10%. There will also be less mortgage products available for BTL properties and it can be more difficult to get approved.
Stamp duty
First-time buyers usually benefit from stamp duty relief up to the threshold limit. However, this relief does not apply when you buy a property to rent out. The good news is that you won’t have to pay a surcharge on your first property, as this only applies when buying a second property.
Landlord responsibilities and other tasks
There are numerous legal responsibilities as a landlord that you will need to comply with, including tax obligations and adhering to regulations.
If you have never owned your own property, you might not be familiar with some of the processes involved in buying a property, which will mean you have lots of new concepts to become familiar with.
Do First Time Buyers Need A Buy-To-Let Mortgage?
You can rent a property without a buy-to-let mortgage only if you own the property outright. If you need a mortgage, you must be honest with your lender about your intentions for the property.
If you let your property without consent from your lender, you will breach the terms and conditions of the loan, and your lender can require immediate repayment of the entire loan amount.
Can First Time Buyers Get A Buy To Let Mortgage?
Yes, but you may find it more challenging to secure a loan than if you have owned residential property before. This is because fewer buy-to-let mortgages are available to first-time buyers – around a fifth by some reckoning. Plus, you’ll likely need to put down a bigger deposit.
Purchasing a buy to let mortgage is much like residential mortgages with three main differences – they come with higher interest rates and fees, a lower loan-to-value ratio, and are generally offered on an interest-only basis. Lenders consider rental properties riskier because most buy-to-let borrowers rely on rental income to cover the mortgage. If your tenants have problems paying the rent, this could have a knock-on effect on the mortgage repayments.
What Are The Criteria For Getting A Buy-To-Let Mortgage?
To get a mortgage on an investment property, you will need a deposit of at least 20%-25% of the property’s value.
Deposit
To get a mortgage on an investment property, you will need a deposit of at least 20%-25% of the property’s value. Some lenders require up to 40%, but most request a 25% deposit.
Affordability
Prepare yourself for strict affordability tests. Most lenders need convincing that the profit from your rental property will cover 125% or even 145% of mortgage payments before they consider offering you a loan.
Your personal income will be an important factor in the decision, and most lenders will require a minimum salary of £25,000. This is because buy-to-let properties are deemed to be a higher risk and lenders need to manage that risk. You can use a mortgage calculator to check whether you are likely to be approved for a buy-to-let and how much you could potentially borrow.
Credit score
Like any other mortgage, you will also need a good credit record and be able to comfortably afford the repayments on any other borrowings you may have. Most lenders have upper and lower age limits for mortgages. Most require you to be 21 years or older at the start of the mortgage and younger than 70 when the mortgage is due to finish.
What If I Am Refused A Buy-To-Let Mortgage?
Talk to a mortgage broker about the different products available, and they could provide mortgage advice to help you overcome any difficulties. If you still struggle to obtain an offer, you may increase your chances using a guarantor.
Which Lenders Offer Buy-To-Let Mortgages?
High street banks, building societies and specialist lenders all offer buy-to-let mortgages. Some of these will be open to first-time buyers, so start by looking at what’s available on comparison sites.
Specific mortgages for first-time landlords can be hard to track down; you may need to consult a mortgage broker with experience in this area.
Buy-to-let First-time Buyer Deposit Amount
As a first-time buyer landlord, you will almost certainly need to put down a larger deposit than a domestic buyer – this could be around 25% of the property’s value but maybe as high as 40%. The larger your deposit, the more likely you will get a mortgage offer and a better rate.
How Is My Income Used To Calculate Affordability?
In the past, buy-to-let mortgage lenders would make offers based on your anticipated rental income – which sometimes left borrowers unable to afford their mortgage payments. Now, lenders tend to look at your income too. They may decide how much to lend you based on a multiple of – 4 or even five times – your income.
What Are The Fees On Buy-To-Let Mortgages?
Arrangement fees on buy to let mortgages tend to be higher, with some charging £2,000 upfront. Some lenders offer mortgages with no arrangement fees, but the interest rates are usually higher.
What If I Have Bad Credit?
Getting a buy-to-let mortgage may be possible, but it will be more difficult than for other applicants. As with anyone looking to borrow money after a bad credit history, it’s advisable to try and improve your credit rating as much as possible by paying off debts, not taking on any new loans and ensuring you don’t miss any payments in the run-up to your application.
You may need to provide a bigger deposit and look at properties with a higher rental yield than other applicants.
How Much Stamp Duty Will First-Time Buy-To-Let Investors Pay?
In recent years, the government has changed stamp duty in a way that impacts buy-to-let landlords. There is currently a 5% surcharge on second homes. The good news for first-time buyers is that you won’t need to pay the surcharge as you don’t already own property. Use this calculator from Which? to discover how much you will need to pay.
However, you won’t be eligible for the reduced fee for first-time buyers, introduced to help them onto the housing ladder (first-time buyers pay no stamp duty on the first £425,000 of a home costing up to £625,000). This is because the benefit doesn’t apply to buy-to-let properties.
What Documents Are Needed For A First-Time Buyer Buy-To-Let Mortgage Application?
As with any other applicant, you’ll need to provide documents that prove your identity, funds, and income, such as:
Bank statements
Payslips (last three and P60)
ID (passport or driving licence)
2 x proof of address (utility bill, council tax bill or bank statement dated within last 3 months)
Proof of deposit
It will also help to provide a comprehensive calculation of the predicted rental yield, including all costs and expenses to show that the rental property will meet financial requirements.
Not if you have taken out a buy-to-let mortgage. The terms of your mortgage won’t allow you to live in the home yourself.
If you want to live in the property while renting out a room, you can apply for a normal residential mortgage, but you should tell the lender of your intentions.
Is It Illegal To Rent Out A House Without A Buy-To-Let Mortgage?
It could be. You will have obtained a mortgage without declaring the full facts to your lender, so technically, you could be committing fraud. If you already have a residential mortgage on a property, and you inform the lender, some will allow you to continue on the same basis by giving you ‘permission to let’, but many will ask you to move to a buy-to-let product.
Can First-Time Buy-To-Let Investors Use The Government’s House Affordability Schemes?
No, these schemes aim to help people get on the housing ladder and find a home to live in, so you won’t be eligible. Schemes such as the Help to Buy Mortgage Guarantee scheme (which runs until 30 June 2025), the First Homes scheme and shared ownership schemes are only available for buying properties that will be main residences.
Can I Get My First-Time Buyer Buy-To-Let Mortgage Through A Limited Company?
Yes. If you are a higher-rate taxpayer, renting out property through a limited company usually has some tax efficiency advantages. Another benefit is that you may still be eligible for the first time buyer relief when you purchase property as an individual.
However, limited companies are considered riskier than individuals because of their limited liability status, so you may find getting a mortgage offer even harder. Some lenders will require the director of the company to enter into a personal guarantee. You may need to use a specialist broker to find you a suitable lender as a limited company and first-time buyer.
It’s important to receive sound mortgage advice to help you make the right decision.
How Does Buy-To-Let Affect Your Chances Of Buying Your Own Home?
If you already have a mortgage on a rental property, you may find it harder to obtain a second one on a home to live in, as lenders will look at all of your debts when deciding whether to make an offer.
If you wish to hold on to your buy-to-let property, you must also pay the stamp duty surcharge on the property you buy to live in.
I began as a junior apprentice in a corporate estate agents in 2006 have been working in the property sector since, so over 14 years of experience. I have worked in a range of industries from Property sales and lettings, to construction, development, commercial sales and lets as well as facilities management and maintenance. I have a degree in Economics, enjoy keeping fit and healthy, support Man Utd and have a young family.
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