What is a buy-to-let mortgage and who is it for?
A buy-to-let mortgage is designed for people buying a property they intend to rent out rather than live in. You’ll need one if you’re purchasing an investment property, converting a residential property to a rental, or remortgaging a property you already let.
BTL mortgages are available to both experienced landlords and newcomers, though criteria vary between lenders. Some require you to already own a residential property; others are open to first-time buyers looking to invest.
How do buy-to-let mortgages differ from residential ones?
While the application process looks similar on the surface, the criteria behind it are fundamentally different.
BTL vs residential mortgages
| Buy-to-let | Residential |
|---|---|
| Affordability based primarily on rental income | Affordability based on your personal income |
| Minimum deposit typically 25% (some accept 20%) | Deposits from 5% with many lenders |
| Interest rates are usually 0.5–1% higher | Generally lower interest rates |
| Most are interest-only (capital repaid when property is sold) | Most are repayment (capital and interest) |
| Stress-tested at higher rates (around 5.5%) | Stress-tested at lower thresholds |
| Stamp duty surcharge of 5% applies on additional properties | Standard stamp duty rates apply |
How much deposit do you need for a buy-to-let?
Most BTL lenders require a minimum deposit of 25% of the property’s purchase price. Some specialist lenders accept 20%, particularly for experienced landlords with a strong portfolio. Use the BTL maximum mortgage calculator to see what you could borrow against expected rental income.
BTL deposit requirements
On a £200,000 buy-to-let property, a 25% deposit means putting down £50,000. Remember you’ll also pay the additional property stamp duty surcharge (currently 5%), legal fees, and potentially refurbishment costs before you see rental income.
How do rental coverage and stress tests work?
This is the core of BTL affordability. Lenders need to see that the rental income comfortably covers the mortgage payment, even if interest rates rise. The BTL maximum rent calculator shows what monthly rent your property needs to clear the typical ICR test.
Most lenders apply an interest coverage ratio (ICR) test. They calculate the mortgage payment at a “stressed” rate (typically around 5.5%) and check that the expected rent covers 125–145% of that payment.
Failing the stress test?
If the rent doesn’t meet the ICR at 125–145%, some lenders will “top up” affordability using your personal income. Others allow you to use a limited company (SPV) structure which may have different criteria. A broker can find the right approach for your situation.
What tax considerations should BTL landlords know about?
The tax landscape for landlords has changed significantly in recent years. Understanding these changes is essential before committing to a buy-to-let purchase.
Section 24 mortgage interest relief
- Individual landlords can no longer deduct mortgage interest from rental income
- Instead you receive a 20% tax credit on interest paid
- Higher-rate taxpayers are most affected — effective tax bills can rise substantially
- Limited company landlords are not affected by Section 24
Stamp duty surcharge
- 5% surcharge on top of standard rates for additional properties
- Applies to buy-to-let purchases, second homes, and company purchases
- On a £250,000 property, the surcharge alone adds £12,500
Capital gains tax (CGT)
- 18% for basic-rate taxpayers, 24% for higher-rate taxpayers on residential property gains
- Must be reported and paid within 60 days of completion
- Annual CGT allowance of £3,000 (2024/25) can offset some gains
Income tax on rental profits
- Rental income is added to your total income for tax purposes
- You can deduct allowable expenses: insurance, repairs, letting agent fees
- £1,000 property allowance available if expenses are minimal
Get tax advice before you buy
We’re mortgage brokers, not tax advisers. The tax rules around buy-to-let are complex and personal to your situation. We’d always recommend speaking to a qualified accountant before purchasing an investment property.
Interest-only vs repayment for buy-to-let
Most buy-to-let mortgages are taken on an interest-only basis, meaning you only pay the interest each month and repay the capital when you sell the property. But repayment is also an option.
| Interest-only | Repayment |
|---|---|
| Lower monthly payments — better cash flow | Higher monthly payments but mortgage reduces over time |
| Capital repaid when the property is sold or refinanced | Property is fully owned at end of term |
| Most popular choice among landlords | Lower overall interest cost |
| You still owe the full amount at the end of the term | Tighter cash flow — less buffer for void periods |
| Property value needs to hold up to cover the loan | Some lenders prefer this for higher-risk cases |
How to apply for a buy-to-let mortgage
The BTL application process is broadly similar to a residential mortgage, but with additional checks around rental income and your landlord experience.
- 01
Research the market
Identify your target area, expected rental yields, and property type. Check local letting agent websites for comparable rents to ensure your figures are realistic.
- 02
Get your finances in order
You’ll need your deposit (typically 25%), proof of income, and bank statements. If you’re self-employed, have your SA302s and accounts ready too.
- 03
Speak to a BTL broker
A broker will assess your situation, run the stress-test calculations, and match you with lenders suited to your profile. This is especially valuable if you’re a first-time landlord or have complex income.
- 04
Get a Decision in Principle
The lender runs a soft credit check to confirm they’d be willing to lend in principle. This strengthens your position when making an offer on a property.
- 05
Find your property and make an offer
Once your offer is accepted, submit the full mortgage application with all supporting documentation.
- 06
Valuation and rental assessment
The lender values the property and checks that the expected rent meets their ICR requirements. They may instruct their own rental valuation.
- 07
Legal work and completion
Your solicitor handles searches, contracts, and the stamp duty payment (including the surcharge). Once everything clears, the purchase completes and you can begin letting.
Speak to a buy-to-let specialist
At Clearview Mortgage Solutions, our brokers help landlords and investors across the UK find the right buy-to-let deal. Whether you’re buying your first investment property or expanding a portfolio, we’ll explain the stress tests, compare rates from 90+ lenders, and handle the application from start to finish — no obligation.