Buy-to-Let
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What is a buy-to-let mortgage?
A buy-to-let mortgage is a loan you take out to buy a residential property you plan to let out for profit. It's specifically aimed at landlords and property investors.
It works the same way as any other mortgage - you put down a deposit and borrow the rest from a lender, then repay it over a set term. But there are different criteria to meet, and you'll need a larger deposit than you would for a residential purchase.
How much could I borrow for a buy-to-let mortgage?
When you buy investment property with a mortgage, the lender's main focus is your potential return on that investment. They generally base the loan size on the potential rental income (known as the yield) that the property could make.
Most lenders will want rental income to cover your mortgage repayments, plus an additional 25-45% to cover taxes, maintenance, insurance and other costs.
Key differences from residential mortgages
Interest rates
Usually a bit higher due to the commercial and higher risk nature of BTL purchases
Repayment type
Interest-only mortgages are common for BTL, while residential mortgages are usually capital repayment
Fees
Usually higher and often charged as a percentage of the property value
Deposit
Many buy-to-let mortgages require around a 20–25% deposit or more, vs 5-10% for residential mortgages. Requirements vary by lender, property and circumstances
Criteria
Often stricter with additional requirements to meet
Loan calculation
Based on rental yield rather than personal income, though both factors are considered
Compare your new mortgage rate options
Lenders have been changing rates recently. Compare your available deals early.
How to apply for a buy-to-let mortgage
Just follow these five simple steps and you'll be well on your way to finding the right buy-to-let mortgage for you:
Do your research
How much are local rents? Is the property in a sought-after location? How much will it cost to maintain?
Know your repayment plan
If you use an interest-only mortgage, you'll need to know how you'll repay the loan at the end of your term (sale of property, investments, pension, etc.).
Prepare your documents
We'll need proof of deposit, income records, bank details, and ID documents. Limited company applications require accounts and tax records.
Get a mortgage in principle
Contact us for an MIP to find out how much you may be able to borrow - this helps when making offers.
Make an offer and apply
Use your MIP to make an offer, then come back to us for a whole-of-market comparison and to start your application.
Related articles
Read some of our highlighted buy-to-let articles below.
Before You Apply
What lenders look at on a buy-to-let application
Buy-to-let is assessed differently to a residential mortgage. These are the main factors that decide what you can borrow.
Rental stress testing
Lenders assess whether the rent covers the mortgage, typically requiring 125% to 145% cover at a stressed interest rate rather than the rate you actually pay.
Personal name or limited company
How you hold the property affects both the products available and your tax position. We can explain the differences, though you should take tax advice from an accountant.
Portfolio landlord rules
If you have four or more mortgaged buy-to-let properties you are classed as a portfolio landlord, and lenders will usually review your whole portfolio.
Deposit and loan to value
Many buy-to-let mortgages require around a 20–25% deposit or more. A larger deposit typically opens up a wider range of products and lower rates. Requirements vary by lender, property and circumstances.
Lending criteria differ between lenders and change regularly. Your home may be repossessed if you do not keep up repayments on your mortgage.
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