What is a buy-to-let mortgage and who is it for?
A buy-to-let mortgage is for a property you are buying to rent out rather than live in yourself. You will need one if you are buying an investment property, turning a home you own into a rental, or remortgaging a property you already let.
You can get a buy-to-let mortgage whether you are an experienced landlord or just starting out, though the criteria shift from lender to lender. Some want you to already own your own home. Others are open to first-time buyers who want to invest.
How do buy-to-let mortgages differ from residential ones?
The application looks similar on the surface, but the criteria sitting behind it are a different thing altogether.
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 buy-to-let lenders ask for at least 25% of the purchase price as a deposit. Some specialist lenders will go to 20%, usually for experienced landlords with a strong portfolio behind them. Try the BTL maximum mortgage calculator to see what you could borrow against the rent you expect to earn.
BTL deposit requirements
On a £200,000 buy-to-let, a 25% deposit means putting down £50,000, which leaves you borrowing at 75% loan-to-value, the size of the loan against the property’s value. Remember you will also pay the additional property stamp duty surcharge (currently 5%), legal fees, and possibly refurbishment costs before any rent comes in.
How do rental coverage and stress tests work?
This sits at the heart of buy-to-let affordability. A lender wants to see the rent cover the mortgage payment with room to spare, even if interest rates climb. The BTL maximum rent calculator shows the monthly rent your property needs to clear the usual interest coverage ratio test.
Most lenders run an interest coverage ratio (ICR) test, which measures the rent against the mortgage payment. They work the payment out at a "stressed" rate, typically around 5.5%, then check the expected rent covers 125–145% of it.
Failing the stress test?
If the rent falls short of the ICR at 125–145%, some lenders will "top up" affordability with your personal income. Others let you buy through a limited company (an SPV, or special purpose vehicle set up to hold property), which can be judged on different criteria. A broker can work out the right route for you.
What tax should buy-to-let landlords know about?
Tax rules for landlords have shifted a good deal in recent years, and they can decide whether the numbers actually stack up. It pays to get your head around them before you commit to a buy-to-let purchase.
Section 24 mortgage interest relief
- Individual landlords can no longer deduct mortgage interest from rental income
- Instead you get a 20% tax credit on the interest you pay
- Higher-rate taxpayers feel it most, as their effective tax bill can rise a fair bit
- Landlords who buy through a limited company 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 are mortgage brokers, not tax advisers. The tax rules around buy-to-let are complicated and they depend on your own circumstances. We would always suggest talking to a qualified accountant before you buy an investment property.
Interest-only vs repayment for buy-to-let
Most buy-to-let mortgages are taken on an interest-only basis. You pay only the interest each month, then repay the capital (the amount you originally borrowed) when you sell or refinance the property. Repayment is an option too.
| Interest-only | Repayment |
|---|---|
| Lower monthly payments, which frees up cash flow | Higher monthly payments, but the mortgage shrinks over time |
| Capital repaid when the property is sold or refinanced | You own the property outright at the end of the term |
| The most popular choice among landlords | Lower overall interest cost |
| You still owe the full amount at the end of the term | Tighter cash flow, so less buffer for void periods |
| The 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
Applying for a buy-to-let mortgage follows much the same path as a residential one, with a few extra checks on the rental income and your experience as a landlord.
- 01
Research the market
Pin down your target area, the rental yield you can expect, and the type of property. Check local letting agent listings for comparable rents so your figures hold up.
- 02
Get your finances in order
You will need your deposit (usually 25%), proof of income, and bank statements. If you are self-employed, have your SA302s and accounts ready as well.
- 03
Speak to a buy-to-let broker
A broker looks at your situation, runs the stress-test sums, and matches you with lenders that fit your profile. That help counts for a lot if you are a first-time landlord or your income is complicated.
- 04
Get a Decision in Principle
The lender runs a soft credit check to confirm it would lend in principle. Having this in hand puts you in a stronger position when you make an offer.
- 05
Find your property and make an offer
Once your offer is accepted, you submit the full mortgage application with all the supporting documents.
- 06
Valuation and rental assessment
The lender values the property and checks the expected rent meets its ICR requirement. It may commission its own rental valuation.
- 07
Legal work and completion
Your solicitor deals with the searches, contracts, and the stamp duty payment, surcharge included. Once it all clears, the purchase completes and you can start 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 are buying your first investment property or adding to a portfolio, we will talk you through the stress tests, compare rates from 90+ lenders, and handle the application from start to finish. There is no obligation to go ahead.