Can First-Time Buyers Rent Their Property?

If you’re a private landlord, you might have one or a portfolio of properties that you rent out. But what if you’re a first time buyer? Can first time buyers rent their property? Let’s look further at rental opportunities and restrictions for first time buyers.

Can anyone rent out any property?

There are restrictions relating to the types of mortgages available to different buyers. A first time buyer mortgage is one such example. And there are regulations surrounding the rental of different types of property. For example, you should be aware of certain rules if you’re looking to rent out a leasehold property.

Whatever your personal circumstances, if you’re intending to rent out a property and you don’t own it outright, you will need to secure a buy-to-let mortgage or have your lender’s written consent to let your property.

If you attempt to rent out a property or even a room without seeking permission, then this is seen as mortgage fraud, which means you could be penalised with extra charges, fines or a criminal record.

What is a first time buyer mortgage?

A first time buyer is someone who does not own and who has never owned property. Mortgage lenders often target first time buyers with specific deals and rates with a first time buyer mortgage.

Can first time buyers rent their property? A first time buyer can only rent out a property with a buy-to-let mortgage. You cannot use a first time buyer mortgage unless it is for a typical residential mortgage.

Can first time buyers rent out their property?

We’ve established that first time buyers can rent out their property if they obtain a buy-to-let mortgage. The problem with this is that many mortgage lenders will see a buy-to-let mortgage for a first time buyer as riskier than if they were applying for a residential mortgage.

This is because buy-to-let mortgages are usually interest only mortgages. For this reason, the provider needs to be assured that the mortgage will be repaid according to the terms.

How might a buy-to-let mortgage differ for a first time buyer?

Every mortgage lender is different, but to lower the risk of a first time buyer taking out a buy-to-let mortgage, they may add in extra criteria within their terms to boost their confidence that the loan will be repaid and on time, such as requesting a larger deposit.

In addition, many mortgage lenders will want to know that the rental property will bring in a monthly income that is higher than the value of the monthly mortgage repayment.

With most buy-to-let mortgages, landlords need to prove that they will cover their monthly repayment, plus 25%. First time buyers usually need to demonstrate that they can achieve more than this amount. It therefore makes sense to do your homework and ensure that your proposed rental property can achieve a good return on investment.

What happens next?

Once you’ve been approved for a mortgage and have secured your property, you will need to ensure it is legally fit and ready for rental, as well as registering with the local authority as a licensed landlord.

Next, you’ll need to source suitable tenants and carry out referencing, check the tenants in and then ensure the property is well maintained, deal with day to day tenant queries, maintenance and repairs, carry out regular property inspections, and collect the rent each month.

If this all sounds rather daunting, you could consider a guaranteed rent scheme.  

A rent guarantee scheme, such as the one offered by City Borough Housing, means everything from the sourcing of tenants to the legal requirements, paperwork, maintenance and repairs, regular property inspections and collection of rent is taken care of. You will receive a guaranteed monthly income, even if your property is vacant or your tenants are defaulting on the rent.

Can first time buyers rent their property?

Yes, first time buyers can rent out their property, but it is harder to do so if you need a mortgage to buy the property. Most mortgage lenders will have stringent rules and criteria in place to ensure that you will be able to afford the monthly payments on the property, as well as generate a good rental income.

If you’re successful in securing a buy-to-let mortgage as a first time buyer, you might want to consider using a guaranteed rent scheme by City Borough Housing. We handle all the responsibilities you would have to deal with as a landlord and guarantee your rent, without any fees, charges or commission.

Interested? Get in touch with our expert team if you’d like to learn more about the benefits of a guaranteed rent  and to request your free rental valuation.