What do lenders require from a first time landlord?

Who counts as a first time landlord

A first time landlord is someone who has never let a property, whether or not they own their own home. Lenders treat the two situations very differently. A homeowner buying their first rental is a standard case for most of the market. A first time buyer who is also a first time landlord, buying a rental before owning a home, is a niche case that a much smaller group of lenders will consider, usually with stricter income requirements, because the arrangement can look like a way around a residential affordability assessment.

The core requirements

Criteria vary, but a typical first time landlord case needs to clear these hurdles:

• Deposit. Usually 25 per cent. Some lenders that offer 80 per cent loan to value to experienced landlords hold first timers at 75 per cent. The full picture on deposits is in our guide to how much deposit you need for a buy to let.
• Minimum income. Many lenders want a personal income around £25,000, some set no minimum but want evidence of earnings, and a few want more for first timers. The income is not usually used to size the loan. It shows the lender you can cover voids and repairs.
• Homeowner status. Most lenders want you to own, or be simultaneously buying, your own residence.
• Clean credit. Recent missed payments or defaults narrow the lender pool sharply for a first application.
• Age. Typically at least 21 for a first buy to let, with maximum ages at the end of term commonly 85 or higher.

A worked example

Take a first time landlord buying a £180,000 terraced house. At 75 per cent loan to value the maximum loan is £135,000, so the deposit is £45,000. The lender then tests the rent. Stressing at 5.5 per cent with a 145 per cent coverage requirement, the rent must be at least £135,000 times 0.055 times 1.45, which is £10,766 a year, or about £897 a month. If the valuer supports a rent of £950, the case passes with a little headroom. If local rents are £850, the loan shrinks to £850 times 12 divided by 0.07975, about £127,900, and the deposit rises by around £7,100. You can test your own figures in our buy to let affordability calculator.

These stress figures are for illustration. Five year fixed products are typically tested at the pay rate, which lowers the rent needed, and limited company applications are usually tested at 125 per cent rather than 145.

What first timers usually cannot buy

Lender appetite narrows quickly as the property gets less vanilla. The common restrictions:

• HMOs. Most HMO lenders want at least 12 months of letting experience, and many want experience with an HMO specifically. The differences in valuation, licensing and lending are covered in our guide to how HMO mortgages differ from standard buy to let.
• Multi unit blocks and holiday lets. Generally treated as specialist lending where experience is expected.
• Ex local authority flats, high rise and flats above commercial premises. Not barred for first timers as such, but the smaller lender pool for the property type compounds the smaller pool for the borrower type.

A conventional house or flat let on a single assured shorthold tenancy is the intended first purchase for almost every lender, and criteria are built around it.

What slows first applications down

The delays we see most often are practical rather than fatal. Deposit evidence that does not cleanly show the build-up of savings. An expected rent taken from an optimistic listing rather than achieved local rents, which unravels at valuation. Choosing a lender whose minimum income test counts basic salary only, when the applicant's earnings are mostly bonus or self employed profit. And for first time buyer landlords, failing to anticipate that the lender will assess the case almost like a residential application, with full income and outgoings scrutiny.

What decides marginal cases

Where a first application is borderline, what usually decides it is the strength of the overall profile rather than any single number: a solid income above the minimum, a realistic rent supported by comparable evidence, a mainstream property, and a clean credit file. Lenders are pricing the absence of a track record, so everything else in the case has to look boring. Boring cases get approved.