Buy-to-Let Properties for First-Time Buyers 2026
Demand has spiked over the years for people who want to buy a property and rent it out, especially first-time buyers. Buy-to-let mortgages allow anyone to do that, even if you have a bad credit score and/or don’t have any income.
Some lenders will approve a buy-to-let mortgage based solely on the property’s rental income. Usually, this is worked out by charging rent at 125% of the monthly mortgage payment.
High street lenders won’t entertain this and would look for new landlords with an existing income. This is done to ensure the interest-only payments on the mortgage don’t fall behind.
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Is 2026 a good time to buy?
According to Nationwide’s monthly report for May, house prices have declined for the third consecutive month, indicating the housing market is losing momentum. This could be a great time to buy because when the market picks up, home values rise, which in turn increases your equity. That can then be used to access further finance for future purchases or property upgrades.
Regarding the economic forecasts, economists predict that house prices will continue to rise in 2021, albeit at a more modest rate, so don’t expect a sharp increase.
However, there is a sting in the tail: You can’t just buy a property, approach a property management company, pay a fee, and have a tenant move in.
It doesn’t work that simply.
How a buy-to-let mortgage works for those with bad credit
First, you’re expected to have an asset, usually as a homeowner. You’ll have an existing mortgage with no missed payments. The main banks would love that scenario.
When you don’t have a mortgage, though, that’s a problem. A specialist lender can solve this by financing the property based entirely on its value and the rental income you can generate.
Some won’t check your credit score; others will review your financial background and make an offer based on how risky they feel you would be to their business interests. The lender’s interest is to be repaid in full, with profit. They dislike repossessions as much as the next person, but they need to know they’re lending you an amount that can be recovered.
What types of buy-to-let mortgages are there?
Special deals are available in the subprime market for first-time buyers with bad credit. Some are for residential properties, and others are for commercial units.
With the tax changes looming and affecting existing landlords, many are moving from residential to commercial units. For commercial buy-to-let mortgages, lenders may prefer to see that you have some experience in property management. For residential properties, though, there’s only one primary concern you need to know about: houses with multiple occupants (HMOs). Think about student accommodation. If you plan to lease the property out by the room rather than the entire property, many leading lenders won’t entertain the idea. Instead, you’d need a commercial lender, as the terms and tenancy agreements will differ, and it’s more complicated than renting out the property as intended.
While tenancy agreements are an issue for landlords and less so for finance, they can affect the type of mortgage product you can get, depending on how you plan to lease the property. HMO is one thing you cannot get wrong, as it can lead you to apply to an unsuitable lender. Since every lender will credit score you, it will affect your rating, which in turn hikes the interest rates future lenders quote you, eating into your profits.
If you want to lease a family home, you’ll want to inquire about a residential buy-to-let mortgage. It would help to speak with a commercial lender for cafes, pubs, shops, food premises, stores, and offices.
Commercial mortgages typically come with a higher interest rate, a higher access fee, and a higher deposit than most residential buy-to-let lenders require. If you have no existing mortgage and few assets to use as collateral, the commercial sector will likely be an unlikely option. Existing landlords are moving towards commercial leases because they’re more secure and attract responsible tenants. With the help of Companies House, they can get a good feel for their tenants’ financial situation before entering into a tenancy agreement.
Property managers consider whether the applicants can afford the rent for residential lettings without compromising living standards. There is still a risk involved as a tenant may not pay, which is the apparent risk. However, the landlord is the property owner and, therefore, is legally responsible for all repairs and maintenance. That cost needs to be factored into the rents you charge.
How much of a deposit might you need?
This is another area that’s been rising steadily in recent years. 80% LTV mortgages are available. Some lenders will go higher, but if they do, you may need a steady income and not rely solely on rental income to pay the mortgage. Remember, you’ll still need to pay your mortgage if you’re without a tenant. You’ll need to cover it from your profits, since no lender will want to wait until you get around to leasing the property.
What not to expect with bad credit is to renovate to rent…
Mortgages are homeowner loans and, therefore, are a secured form of finance. For your property to be considered a home and, therefore, financeable, it must be inhabitable. That means it needs to have a working water supply, utilities, washing facilities, and a functioning kitchen. If any of those aspects aren’t working, the property will need renovation to bring it up to a livable standard.
That will cost, and if you’re approaching a lender with a bad credit history, they will want a larger deposit to extend your finances. The amount you’re offered will be based on the property value, so you will find it challenging to get a home loan to renovate a property because it will increase the loan-to-property value ratio. As a first-time buyer, to access a buy-to-let mortgage on a residential property with a bad credit score, you’ll need a higher deposit, usually around half the total amount you need.
If you plan to renovate, commercial lenders would be a more viable source of financing. Bridging finance is also available to those with a poor credit history. However, this carries a higher charge and shouldn’t be relied on for capital investment; it’s better for cash flow if you take on a renovation project or your rental doesn’t go to plan and you need a short burst of cash.
To summarise:
An adverse credit history will not prevent you from getting on the property ladder. A lack of income will. If that’s what’s happening, financing options for first-time buyers can help you get onto the property ladder using a buy-to-let mortgage.
There are many ways to get onto the property ladder and many more that can be considered barriers, which, in most cases, can be overcome by working with the right lender.
EQUITY RELEASE OPTIONS:
- Should You Consider Equity Release?
- RBS Royal Bank Of Scotland
- LV= Liverpool Victoria
- Equity Release Providers
- Fees and Costs Of Equity Release
- Aviva
- Just Retirement
- Canada Life
- Pros and Cons
- HSBC
- Check equity release eligibility
- Hodge Lifetime
- Equity Release For Under 55
- Legal and General
- Sunlife Equity Release
Can first-time buyers repay a debt to families with a home loan in addition to their mortgage?
If the first-time buyer meets the secured loan criteria, with the help of the home loan bad credit calculator, they can determine how much money they can get and what the payments will be.
