Buy-to-Let Mortgages Explained: How They Work and What UK Landlords Need to Know
- Alex Mason - Investing & Financial Growth Writer
- Apr 16
- 5 min read
If you're considering buying a property to rent out, you'll likely need a buy-to-let mortgage. These work differently to residential mortgages and come with specific rules around deposit size, rental income, tax, and affordability.
Whether you're a first-time landlord or expanding an existing property portfolio, understanding how buy-to-let mortgages work is essential for making informed, profitable decisions.
This guide walks you through everything UK landlords need to know — from eligibility and deposit requirements to tax implications and tips for getting the best deal.
What Is a Buy-to-Let Mortgage?
A buy-to-let (BTL) mortgage is a loan specifically designed for people who want to buy property as an investment to rent out to tenants, rather than to live in themselves.
Unlike residential mortgages:
Your affordability is based more on expected rental income than your salary
You’ll usually need a larger deposit
The mortgage may be interest-only, meaning you repay just the interest monthly and the full capital at the end
Who Can Get a Buy-to-Let Mortgage?
Most lenders require you to:
Be over 21 (some set a minimum of 25)
Own your own home already (exceptions exist for first-time buyers)
Have a minimum income — often £25,000+
Pass credit and affordability checks
Demonstrate sufficient rental income potential from the property
Note: You don’t have to be a full-time landlord. Many BTL mortgage holders have other jobs or sources of income.
How Much Deposit Do You Need?
You’ll typically need:
At least 25% deposit
Some lenders accept 20%, but the rates are often higher
For new landlords or riskier property types, 30–40% may be required
The lower your Loan-to-Value (LTV), the better the rate you'll usually get.
Related article: How Much Deposit Do You Need for a Mortgage?
How Is Rental Income Assessed?
Lenders usually require that your expected monthly rental income covers 125% to 145% of your mortgage payment.
This is known as the Interest Coverage Ratio (ICR). For example:
Monthly mortgage payment: £800
Required rental income (at 125%): £1,000
Some lenders will require an independent rental valuation to confirm the figures.
If your rental income is borderline, you may be asked to:
Put down a larger deposit
Extend the mortgage term
Use a broker to access more flexible lenders
Can You Get a Buy-to-Let Mortgage as a First-Time Buyer?
It’s possible, but harder. Lenders see first-time buyers without an existing residential mortgage as higher risk.
You’ll typically need to:
Show a high income and strong credit history
Have a large deposit (often 30%+)
Demonstrate sound knowledge of landlord responsibilities
Tip: Consider getting a residential mortgage first if you’re planning to become a landlord in future.
Types of Buy-to-Let Mortgages
1. Interest-Only Mortgages
Most common type for landlords
You pay only interest each month
Capital is repaid in full at the end of the term (usually by selling the property)
2. Repayment Mortgages
Monthly payments cover both interest and capital
More expensive monthly, but you build equity
Lower risk, especially for longer-term investment
Related article: Interest-Only vs Repayment Mortgages: Which Is Right for You?
What Are the Costs of a Buy-to-Let Mortgage?
Aside from the mortgage itself, landlords must budget for:
Stamp Duty Land Tax — Includes a 3% surcharge on additional properties (more info at gov.uk)
Mortgage arrangement fees — Often £1,000–£2,000
Valuation and survey fees
Conveyancing/legal costs
Letting agent fees (if applicable)
Ongoing property maintenance and repairs
Landlord insurance — Not mandatory, but strongly recommended
Do You Need a Special Mortgage for Airbnb or Holiday Lets?
Yes — these fall under holiday let mortgages or short-term let mortgages.
Traditional buy-to-let mortgages typically prohibit short-term lets, so you’ll need:
A mortgage that allows holiday rentals
A higher deposit
Planning permission in some areas
Check your lender’s terms before advertising on platforms like Airbnb or Booking.com.
Tax Considerations for Buy-to-Let Mortgages
Landlord taxation has changed significantly in recent years.
Key Points:
You pay income tax on rental profits
Mortgage interest relief is limited — You can no longer deduct all mortgage interest from rental income
You now receive a 20% tax credit instead
Capital Gains Tax (CGT) applies if you sell and make a profit
You may also need to file a Self Assessment tax return each year. Use MoneyHelper’s budgeting tool to plan ahead.
Should You Buy Through a Limited Company?
Many landlords now set up a limited company to buy property because:
Mortgage interest can be deducted as a business expense
Corporation tax (currently lower than higher-rate income tax) applies to profits
However, drawbacks include:
Limited choice of lenders
Higher mortgage rates
More complex legal and accounting needs
Speak to a tax adviser before making this decision.
How to Improve Your Buy-to-Let Mortgage Application
Boost your deposit to lower the LTV and access better rates
Build a strong credit history
Provide proof of rental income if you already own BTL properties
Use a mortgage broker to access specialist or portfolio lender deals
Have realistic rent expectations backed by local market research or letting agent valuations
Related article: Should You Use a Mortgage Broker?
Unique Insight: Let-to-Buy as an Alternative Entry Route
Struggling to sell your home but want to move?
You could use a let-to-buy mortgage, where:
You let out your current home
Take a BTL mortgage on it
Use the equity as a deposit for a new residential home
This lets you become a landlord without selling your current property. Not all lenders offer it — but it can be a smart strategy with the right financial advice.
FAQs: Buy-to-Let Mortgages in the UK
Can I live in a property with a buy-to-let mortgage?
No. Buy-to-let mortgages are for investment purposes only. Living in the property would breach your mortgage terms.
What happens if I can’t find tenants?
You’re still responsible for paying the mortgage. Build a savings buffer to cover void periods or consider rental guarantee insurance.
Is it harder to get a buy-to-let mortgage now?
Lending criteria have become stricter — especially since tax changes and tighter stress testing. Using a broker can help navigate current requirements.
Can I remortgage my buy-to-let?
Yes — many landlords remortgage to:
Get better rates
Release equity
Switch from interest-only to repayment
Related article: How to Remortgage Your Home in the UK
Is buy-to-let still worth it?
It depends on your goals. Despite tighter rules, BTL can still offer:
Long-term capital growth
Regular rental income
Diversification of your investment portfolio
But it’s not passive income — being a landlord comes with risk, regulation, and responsibility.
Final Thoughts: Is a Buy-to-Let Mortgage Right for You?
Buy-to-let can be a profitable long-term investment — but only if you go in with your eyes open.
Before committing:
Understand your obligations as a landlord
Calculate realistic costs and rental income
Compare mortgage deals using a broker
Get advice on ownership structure and tax
With the right planning and guidance, a buy-to-let mortgage could help you build wealth over time — but it’s not something to dive into blindly.
You can check the credentials of any mortgage adviser or lender using the FCA Register.
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