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Buy-to-let mortgages

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The FCA does not regulate mortgages on commercial or investment buy-to-let properties.

Happy couple signing paperwork

What is a buy-to-let mortgage?

A buy-to-let mortgage is used to purchase a property you plan to rent out to tenants. There are a number of key differences from a standard residential mortgage:

  • Borrowing is based on the income (or yield) you'd make from letting out the property. Some lenders may also consider your personal income alongside this

  • You'll need a much larger deposit than you would to buy a residential home of between 20-40%, with most lenders asking for at least 25%

  • You're unable to live in a property with a buy-to-let mortgage - even during the renovation period

  • Buy-to-let mortgages are not typically regulated by the Financial Conduct Authority (FCA) but it's possible to get a regulated buy-to-let mortgage in specific circumstances, such as renting to family members

Woman opening a door

How does a buy-to-let mortgage work?

Buy-to-let mortgages are generally offered on an interest-only mortgage basis, so only the interest is repaid each month - the capital (amount borrowed) is repaid at the end of the mortgage term. It’s possible to find buy-to-let deals with capital repayment terms, but these are less common.

Tom Clayton, Mortgage Expert at Mojo Mortgages, said: "We’re seeing more flexibility within the buy-to-let mortgage industry, with an increasing number of lenders offering more options within the buy-to-let space."

With an interest-only mortgage you’ll need a repayment plan in place to cover the final sum repayment. Most landlords sell the rental property, but you can also use savings or investments, depending on the preferences of the specific lender.

Buy-to-let mortgages can be taken as a fixed-rate mortgage or a variable-rate mortgage deal (discount or tracker), so you'll need to decide which works best for you.

Who is eligible for a buy-to-let mortgage?

Just like any mortgage or financial loan product, you will need to meet the lender’s eligibility criteria to secure a buy-to-let mortgage deal. There are several factors to consider:

  • Minimum age: Many lenders have a minimum age requirement for buy-to-let mortgages, usually 21 or 25

  • Maximum age: There may also be maximum limits, which means that you can’t be over a certain age when the mortgage term ends – although this can be a little more flexible in the buy to let market than for standard residential homes

  • Home ownership status: Some lenders are reluctant to lend to those who don’t already own their own home, so if you’re looking to get a buy-to-let mortgage as a first time buyer, it can be more difficult to find a suitable lender, but it’s certainly not impossible

  • Minimum income: You may need to meet a certain income threshold, often at least £25,000 per year. There are lenders that have no minimum income requirement for buy-to-let mortgages, however

  • Deposit: You’ll need a higher deposit to become a buy-to-let landlord. Lenders usually require at least 25% of the purchase price, but you might get a deal with a 20% deposit, while some lenders may ask for a bigger deposit of 40%

  • Rental income: The rental income (or rental yield) is what your loan figure will be based on, but rather than simply being enough to cover it, most lenders will expect this income to cover at least 125% of the mortgage repayments. For portfolio landlords (those who have four or more mortgaged buy-to-let properties), rental income may need to be as high as 145% of the monthly mortgage payments

  • Credit history: A strong credit rating is important for all mortgage borrowers, and the better your score, the greater choice of providers and better rates of interest you will have available to you

  • Property type: Some lenders prefer not to lend on certain types of rental property, so if you’re looking for a mortgage for a student let or another type of HMO (house of multiple occupancy) property, you may need to seek out a lender with a little more flexibility around rental types

How much can I borrow with a buy-to-let mortgage?

Loan size is typically based on the potential rental income from the property that you’re buying, so it depends on the property itself, rather than your personal income. That said, you'll still have an income assessment to ensure you'll be able to repay the loan when your property is vacant.

An ARLA registered letting agent should be able to advise you about local rental property prices in the area you’re looking to buy, or you could research this on property rental sites, such as Zoopla.

Buy-to-let mortgage rates

The interest rate available to you will vary based on a number of factors, including the loan to value (LTV) of your borrowing and how well you meet the criteria outlined above.

Another important factor, of course, is what rates are available on the market. These obviously differ between lenders, but also tend to differ depending on the product type. Below we have highlighted the cheapest buy-to-let mortgage rates currently available on a two-year fixed rate buy-to-let deal.

Lender typeCurrent average rateCurrent lowest rate
Across all lenders5.62%*3.94%*
Big 6 lenders5.39%*4.99%*


Date Updated 1 June 2023

The rates available on different lengths of fixed-rate deals and variable rate deals, such as tracker mortgages, typically differ to the above. Speaking to a whole-of-market mortgage broker can help you find the best buy-to-let mortgage rate for you and your circumstances.

How much will my buy-to-let mortgage cost?

There are a number of factors, that will affect the cost of your buy-to-let mortgage, including the size of the loan, your interest rates and size of your deposit:

  • Deposit - You need at least 20-25% of the total value of the property, but the best deals are available to those with 40% deposit or more. So for a property worth £300,000, you need at least £60,000 and more than £120,000 to get the best rates

  • Capital repayment - Most buy-to-let mortgages are interest-only mortgage, so you'll need to repay all of the capital (amount borrowed) at the end of the term. Some landlords use savings or investments but others remortgage or sell the property to pay back the debt

  • Interest rates - Interest rates vary significantly depending on factors such as the value of the property, your credit rating, the size of your deposit and whether you opt for a fixed or variable rate deal and what's available on the market at the time

“There has been more interest in variable rates from buy-to-let investors, who are looking at the difference in price compared to a fixed-rate deal. When they consider how much rates would have to increase to justify opting for a fixed-rate deal, some believe it will be more cost-effective to choose a variable-rate. However, this is dependent on the borrower’s attitude to risk - for many a fixed deal will give them the peace of mind they prefer.”
Ron Ogbue, Mortgage Expert at Mojo Mortgages

What additional fees do I need to pay on a buy-to-let property?

The fees involved with arranging a buy-to-let mortgage can be slightly higher than they are for a residential purchase, as this is seen as a commercial transaction. That said, the types of costs involved are largely the same, and include:

  • Arrangement fees

  • Valuation fees

  • Legal fees and conveyancing

There are also additional costs involved with becoming a landlord that you may wish to consider:

Letting agent fees

If you use an agent, they will typically charge 10 to 20% of the rental income as a fee to manage the property. In return, you leave the day-to-day dealings with your tenant to them, reducing the time and effort required.

If you’re not going to use a letting agent, remember that maintenance, viewings, posting ads and collecting payments all take time. It could also make finding and vetting the right tenant a little harder, which may cause you problems down the line if they struggle to pay the rent or fail to maintain the property properly.

Additional stamp duty

When you buy a property in the UK, you usually need to pay stamp duty, although this depends on the value of the property and your buyer status. If you already own another property (including your own residence), any buy-to-let purchases will be classed as a second or subsequent homes for Stamp Duty purposes.

In England and Northern Ireland, you pay a 3% surcharge and in Scotland and Wales, a 4% surcharge in addition to the regular standard stamp duty tax charges for second homes and any additional homes purchased. 

It's also worth noting that if you purchase a buy-to-let property as a first-time buyer, you won't be eligible for the stamp duty relief that first-time buyers buying a residential property have.

Maintenance costs

You'll need to make sure you can cover all the costs of maintaining the property. Buying somewhere run-down or with a big garden will, of course, increase those costs. 

A new build may have less maintenance, but the list price can sometimes be inflated, so consider what tenants are likely to be willing to pay to rent your property versus the day-to-day cost of running it.

There are also a number of regulations that you'll need to comply with in order to legally offer your property for let. For example, certain professional certifications, such as gas safety will be needed.

Income tax

The money you get from renting out your house is subject to income tax. This will be charged at the rate applicable to your overall income level. You may want to consider a limited company buy-to-let mortgage to take advantage of the tax benefits this can offer landlords.

Capital gains tax

If you decide to sell a rental property and you make any profit from the sale, you will also need to pay capital gains tax on the profitable element of the sale price. It’s worth speaking to a tax specialist before you take the leap into becoming a full time landlord.

Building and landlords’ insurance

Whilst your tenants will need to arrange their own contents insurance, as a landlord, it’s your responsibility to pay for buildings insurance to cover any structural issues. You may also want to look into landlords' insurance, which can protect your income in the event of tenant-free periods, or if you have tenants who get into financial difficulties. 

Kellie Steedquotation mark
Securing the best rate for your buy-to-let mortgage is an easy way to ensure you're maximising profit. In today's turbulent market, a broker is an excellent resource for those looking to make the most of their portfolio.
Kellie Steed, Mortgage Content Writer

Buy-to-let FAQs