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Guide

A guide to buy-to-let mortgages

Buy-to-let mortgages work differently from residential ones. Lenders focus on rental income, require larger deposits, and apply stress tests that can catch first-time landlords off guard. This guide covers how BTL mortgages work, what you’ll need, and how to find the right deal.

In this guide

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?

BTL vs residential mortgages

Buy-to-let

  • Affordability based primarily on rental income
  • Minimum deposit typically 25% (some accept 20%)
  • Interest rates are usually 0.5–1% higher
  • Most are interest-only (capital repaid when property is sold)
  • Stress-tested at higher rates (around 5.5%)
  • Stamp duty surcharge of 5% applies on additional properties

Residential

  • Affordability based on your personal income
  • Deposits from 5% with many lenders
  • Generally lower interest rates
  • Most are repayment (capital and interest)
  • Stress-tested at lower thresholds
  • Standard stamp duty rates apply

How much deposit do you need for a buy-to-let?

BTL deposit requirements

25%

Standard minimum

What most mainstream BTL lenders require

20%

Specialist lenders

Available to experienced landlords with strong rental yields

40%+

Best rates

Significantly better rates unlock at 60% LTV and below

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?

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.

125%

Minimum ICR (basic rate taxpayer)

Rental income must be at least 125% of the stressed payment

145%

Minimum ICR (higher rate taxpayer)

Higher-rate taxpayers face a stricter test

5.5%

Typical stress rate

The assumed interest rate used in the calculation

What tax considerations should BTL landlords know about?

  • 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

Interest-only vs repayment for buy-to-let

Interest-only

  • Lower monthly payments — better cash flow
  • Capital repaid when the property is sold or refinanced
  • Most popular choice among landlords
  • You still owe the full amount at the end of the term
  • Property value needs to hold up to cover the loan

Repayment

  • Higher monthly payments but mortgage reduces over time
  • Property is fully owned at end of term
  • Lower overall interest cost
  • Tighter cash flow — less buffer for void periods
  • 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.

  1. 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.

  2. 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.

  3. 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.

  4. 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.

  5. Find your property and make an offer

    Once your offer is accepted, submit the full mortgage application with all supporting documentation.

  6. 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.

  7. 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.

Get a mortgage quoteBack to Buy-to-Let Mortgages

Related guides

More guides in our buy-to-let mortgage hub.

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