Can First-Time Buyers Get a Buy-to-Let Investment in the UK?

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Things to Consider When Investing in Buy-to-Let as a First-Time Buyer

If you’re a first-time buyer looking to purchase a buy-to-let property, you’re in luck. Many investors do not realise that you don’t need to own a residential property to invest in the UK buy-to-let market.

However, there are some things you should consider before taking the plunge.

Read on for more information about buying a property to rent out as a first-time buyer.

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Investors Need a Larger Deposit for Buy-to-Let Mortgages

Typically, a buy-to-let mortgage requires a larger house deposit compared to buying a home to live in. Saving for even a small deposit can be challenging due to rising house prices. That being said, property prices have been somewhat subdued in spring 2024, meaning it could be a good time to invest in buy-to-let before price growth picks up.

Experian suggests you need at least 25% of the property’s purchase price as a deposit for a buy-to-let mortgage. Some lenders may accept a 20% deposit. Keep in mind that your deposit size, among other factors, influences your monthly payments.

However, if you’re looking to save money on your investment, according to Lloyds Bank, some mortgages will let you apply with up to three people, spreading the cost of the investment and the profits. This would mean a less substantial yield on your investment but limit the risks associated with renting out a property. Learn more about how rent calculations are worked out with our handy rental income calculator or our Wales stamp duty tools.

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First-Time Buyers Will Miss Out on Stamp Duty Relief

Buying a buy-to-let property also means missing out on first-time buyer benefits like stamp duty relief. While you’ll pay stamp duty on your investment property, it won’t be as much as non-first-time buyers who pay stamp duty on a second home.

Instead, you’ll be charged the same rate as non-first-time buyers buying a home to live in. If you later decide to buy a property for yourself but continue renting out your investment property, you’ll have to pay the total buy-to-let/second home surcharge.

Discover More: For more information on the costs associated with buy-to-let, read our guide on buy-to-let tax.

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Off-Plan vs Completed Property

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Buyers Will Be Unable to Use a Lifetime ISA Without Fees

A Lifetime ISA (Individual Savings Account) allows you to purchase your first home or save for the future. To open a Lifetime ISA, you must be between 18 and 40 years old.

You can contribute up to £4,000 annually until you reach the age of 50, with your initial payment required before turning 40.

The government provides a 25% bonus on your savings, capped at £1,000 per year.

If you’ve been saving for your first home in a Lifetime ISA, you can’t use the bonus for an investment property. Additionally, if you take out your savings from your LISA for anything other than your first residential home or retirement, you’ll also face a small withdrawal fee, reducing the amount you receive.

Find Out More: If you want to read more about buy-to-let investment, see our guide on safe investments with high returns.

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Advantages of Purchasing Buy-to-Let Properties as a First-Time Buyer

There are numerous advantages if you want to invest in buy-to-let property as a first-time buyer:

You can invest in property in a cheaper area without relocating and earn high yields on an affordable investment.
The rental income from a property can be used to cover living expenses or create passive income.
Reduced stamp duty compared to experienced landlords.

For more property investment insights, check out some of our buy-to-let area guides, such as: