Buy-to-Let Mortgages

Looking to invest in property and earn rental income? A buy-to-let mortgage could be the key. These specialist mortgages are designed for landlords — whether you're buying your first rental property or adding to a growing portfolio.

What Is a Buy-to-Let Mortgage?

A buy-to-let mortgage is a loan you use to buy a property that you intend to rent out, not live in. It’s different from a standard residential mortgage, and often comes with higher interest rates and larger deposit requirements. These mortgages are also sometimes called “landlord mortgages” or abbreviated as BTL mortgages.

Don’t confuse it with a let-to-buy mortgage, that’s when you rent out your current home to buy a new one.

How Do Buy-to-Let Mortgages Work?

Buy-to-let mortgages work much like residential ones, you borrow a set amount, pay interest, and repay the loan over time. However, most BTL mortgages are interest-only, meaning you only pay the interest each month. At the end of the term, you’ll need a plan to repay the full loan amount, typically through savings, selling the property, or refinancing.

Lenders expect the rental income from the property to cover your monthly payments, plus a cushion. If rent won’t cover the costs, your mortgage application may be declined.

What Does a Buy-to-Let Mortgage Cost?

The total cost of a buy-to-let mortgage depends on several key factors:

• Interest rate
• Deposit size
• Length of the mortgage term
• Fees and charges

Lenders will provide a full breakdown of monthly repayments and fees before you apply.

Interest Rates on Buy-to-Let Mortgages

Your interest rate is influenced by:

• Loan-to-Value (LTV): A larger deposit means a lower LTV — and usually a better rate.
• Credit score: A strong credit history helps secure more competitive rates.
• Fixed vs Variable:

- Fixed rates offer predictable monthly payments.

- Variable rates can rise or fall depending on market conditions.

Who Can Get a Buy-to-Let Mortgage?

Eligibility criteria vary, but most lenders expect you to:

• Earn at least £25,000 a year
• Provide a deposit of at least 20–25% (sometimes more)
• Already own your own home (in many cases)
• Be aged 21 or over (some start at 18)
• Be under a certain age at the end of the mortgage (usually 70–75)
• Have a good credit score and manageable debts
• Be in a strong financial position to manage landlord responsibilities

How Much Can You Borrow?

Buy-to-let lenders base their loan offers on expected rental income, rather than just your salary. Most want the projected rent to be 25–45% higher than the mortgage repayments.

To estimate your potential rental income:

• Review similar local rental listings
• Get valuations from letting agents

Lenders often carry out rental stress tests to check whether you could still afford repayments if interest rates rise.

How to Get the Best Buy-to-Let Mortgage Deal

To secure the right deal for your situation:

• Choose the right type:
• Fixed-rate = certainty.
• Variable-rate = potential savings (but more risk).
• Check your credit score: Improve it if necessary to access better deals.
• Compare fees: Look beyond the interest rate — factor in product fees, arrangement fees, and early repayment charges.
• Shop around: Use a broker or mortgage comparison tool to explore a wide range of lenders.

Important Considerations Before You Apply

What If the Property Is Empty?

Rental income isn’t guaranteed. You’re still responsible for mortgage repayments even if the property is vacant. Many landlords set aside savings to cover any rental voids.

Extra Costs for Landlords

Owning a rental property involves more than just mortgage repayments. Be prepared for:

• Landlord insurance: Often required by lenders; covers the building, contents, and tenant-related issues.
• Legal fees: Solicitor or conveyancer costs.
• Product fees: Upfront charges by the lender.
• Surveys: Optional but recommended.
• Stamp Duty:
• England & NI: 3% surcharge
• Scotland: 6% (ADS)
• Wales: Higher surcharge
• Letting agency fees: Around 10% of rental income (varies).
• Maintenance & repairs: Ongoing property upkeep.
• Safety checks:
• Annual gas safety certificate
• Electrical inspection every 5 years
• Smoke and carbon monoxide alarms
• Energy Efficiency: The property must have an EPC rating of E or above.

Tax on Rental Income

Rental income is subject to income tax at your usual rate. However, you can deduct many allowable expenses, including:

• Letting agent fees
• Repairs and maintenance
• Landlord insurance
• Council tax and utilities (if paid by you)

Note: Mortgage interest is no longer fully tax-deductible, but you may receive a 20% tax credit on interest payments.

If you sell the property in the future, you may also owe Capital Gains Tax on any profit, after deducting allowable costs and your personal tax-free allowance.

Is Buy-to-Let Right for You?

Investing in property can deliver long-term returns, but it comes with responsibilities and risks. Ask yourself:

• Can I still cover costs if the rent stops coming in?
• Am I ready for the admin, repairs, and legal duties of being a landlord?
• Do I have an exit plan for repaying the mortgage?

If the answer is yes, it could be worth comparing the latest buy-to-let deals or speaking to a specialist mortgage broker to take the next step.