Updated: December 10, 2021

A Complete Guide to Buy to Let Mortgages

Looking for a buy to let mortgage? Read our in-depth guide to find out everything you need to know.

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Pete Mugleston

Author: Pete Mugleston - Mortgage Expert

Updated: December 10, 2021

If you’re thinking of borrowing money to buy a rental property you’ll need a buy-to-let mortgage. By following this guide you’ll have a better understanding of what’s involved, how to find the right lender, and be more equipped to navigate your way through the process.

What is a buy-to-let mortgage?

Buy-to-let (BTL) mortgages are the primary finance vehicles used when you want to buy a property with the sole purpose of renting it out rather than living in it. This is the case whether you’re looking to rent the property on either a long or short-term basis (like a holiday let).

Many lenders tend to offer BTL mortgages on an interest-only basis (although some lenders do offer a capital and interest option too). The good news is this means your monthly mortgage repayments will be lower as they’ll only consist of interest. However, you’ll need a plan for how you intend to repay the capital element at the end of the term.

In the case of BTL mortgages, most landlords will pay off the capital element by either allowing the excess profit from the rental income to build up or selling the property for a profit at some point before the loan is due to end.

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What you need to know before you apply

Borrowing money to purchase a buy-to-let property is considered higher risk by lenders, which is why you can’t use standard residential mortgages. If you’re looking for a BTL mortgage, there’s a few general points you should be aware of before you proceed:

  • Interest rates for BTL mortgages will usually be higher than for residential mortgages. The arrangement fees attached are also, generally, higher
  • Minimum deposits for a BTL mortgage are normally between 20%-25%
  • If you already own a property, there’s an additional 3% stamp duty surcharge payable on any buy to let property (or any second home) purchase thereafter
  • Affordability checks are based primarily on the rental income the property can achieve over and above your mortgage repayments
  • Most lenders will want to see rental yields anywhere between 125%-145% of your BTL mortgage payments
  • Some lenders will take into account your personal income in order to bridge any gaps between the property’s rental yield and the mortgage payments. This is known as ‘top-slicing’
  • The majority of lenders will still check your credit history before they proceed with your application, although there are some specialist lenders who deem this unnecessary for BTL mortgages
  • A more comprehensive type of insurance cover – known as landlords insurance – will be needed when you buy a rental property
  • Unlike residential mortgages, BTL mortgages are not usually regulated by the Financial Conduct Authority (FCA)

This is where appointing an experienced buy-to-let mortgage broker can be a real advantage. They’ll be able to provide you with all the information you’ll need on buy to let mortgages and guide you through the whole process.

How to get a buy-to-let mortgage

For anyone who’s looking for a buy-to-let mortgage, there’s a few steps you can take to make the whole process a lot more straightforward. This is how we’d recommend you approach it…

Step 1. Do some research

Buying a rental property is not really the same as buying a property you want to live in. Your research needs to focus on finding a property that will secure the best rental return rather than one you most like the look of.

This might mean looking at a type of property you’ve never considered before like a house converted into flats that can be let out to students, for example. It’s a business decision, not a personal one.

Location is also a crucial factor – what are the typical rental yields on properties in the area you’re looking at? Also, think about the costs and fees associated with owning a rental property. Are you going to use a letting agent? If so, what are the typical costs involved?*

(* = currently, most letting agent fees range from between 10%-20% of the rental income)

Step 2. Speak with an experienced buy to let mortgage broker

One of the smartest decisions you can make, right at the outset, is to speak with a broker who has experience with buy-to-let mortgages and understands the rental market.

Mortgage lenders are guided by the same rules but they don’t all use the same eligibility criteria. This is why you should approach a buy-to-let mortgage broker first, rather than trying to apply directly with a lender. A broker can save you a lot of time and energy by identifying which lenders will look more favourably on your application.

This is particularly important with a buy to let mortgage, where affordability assessments and eligibility criteria differ from standard residential mortgages. In effect, what you’re doing is hiring someone who can guide you through the process, whilst avoiding all the pitfalls.

We know the buy to let mortgage brokers we work with all fit this description. If you get in touch we can arrange for someone to give you a call straight away.

Step 3. Apply!

Once you’ve done your research and spoken with a buy-to-let mortgage broker, you’re now much better equipped and ready to find the best lenders who can deal with your application. The good news is, you’re not doing this on your own!

The mortgage broker we match you with can manage your application from start to finish, helping you find the right mortgage deal that best suits your circumstances and then liaising with the lender on your behalf.

Eligibility requirements

Just as with residential mortgages, lenders are looking for confidence and stability when assessing your buy-to-let application. However, the buy-to-let market represents some different challenges and what lenders perceive as higher risks.

For example, there may be periods where you’re between tenants and not receiving any rental income or if a tenant defaults on their payments this dispute may take a while to resolve. Both these scenarios could leave you unable to cover your mortgage repayments.

All of this basically means that lenders are generally more cautious about the amount you can borrow for a BTL mortgage than for residential and, as a result, they have to be more robust when assessing an application.

There’s three main factors that will influence your eligibility and, ultimately, determine how much you can borrow for a buy to let mortgage:

Bullet Tick The size of your deposit
Bullet Tick Amount of rental income you expect to receive from the property
Bullet Tick Your credit history and annual income (non-rental)

The size of your deposit

The size of deposit you’ll need will vary from lender to lender. The majority of lenders work towards a maximum loan to value (LTV) of between 75%-80%, resulting in a minimum deposit required of 20%-25%.

Depending on the size of the loan (usually from £1 million upwards) or the type of property you’re looking to buy (new build homes and flats), the LTV on offer from some lenders may reduce further to 60%-70%.

Remember, the higher your deposit, the more lenders will consider your application, which should also mean you have a better chance of securing the best rates on offer.

Amount of rental income you expect to receive from the property

Affordability assessments for buy-to-let mortgages focus predominantly on how much rental income you’re expecting to earn. More specifically, a lender will use a stress test calculation, known as an interest cover ratio (ICR) to establish how much of a profit buffer exists between the rent premium and the mortgage repayment.

The majority of lenders will want to see a rental yield equivalent to anywhere between 125%-145% of your mortgage repayment. So, for example, if your mortgage repayment is £500 per month*, the rent from the property should be between £625-£725.

(* = Most lenders currently use a representative base rate of 5.5% for the purpose of an ICR calculation)

As with your deposit, the stronger the rental yields are for your property, the better chance you have of being able to secure the best rates from lenders.

Your credit history and annual income (non-rental)

Whilst there are some lenders whose main focus is solely on rental yields and ICRs, the vast majority of lenders will still conduct a personal credit check before they can approve your BTL mortgage application.

So, with this in mind, it’s important you regularly monitor your credit score to make sure it has a clean bill of health. Websites such as Clearscore and Experian, for example, offer their services usually on a fee-free basis.

Some lenders are also happy to include employment earnings in addition to the property’s rental income as additional evidence of your ability to repay your BTL mortgage. They may also want to check all your outgoings to ensure sufficient disposable income exists.

Can you get a buy-to-let mortgage if you’re a first-time buyer?

Yes, it’s certainly possible. Whether you’re a first-time buyer or a first-time landlord there’s quite a few lenders who will consider your application. As long as you have a sizable deposit, solid credit history and the rental property has a strong potential rental yield you have a good chance of success.

Also, if you’re a first-time buyer you won’t be charged the 3% additional stamp duty as it only applies on any property purchased after this. However, that does mean it would apply if or when you buy your first residential property.

Is it easier to get approved if you already own a rental property?

Potentially, yes although new guidelines introduced by the Bank of England in 2017 have made it more restrictive than it used to be. If you own four or more rental properties lenders will now categorise you as a ‘portfolio landlord’.

Lenders will ask portfolio landlords for details on each of their existing rental properties, including total income yields, existing mortgage arrangements, profit/loss accounts etc. before they can agree to any more lending.

In addition, some lenders may also impose other conditions specifically for portfolio landlords, such as:

Bullet Tick A maximum loan to value (LTV) across the whole portfolio (75%-90%)
Bullet Tick Maximum number of mortgaged properties in the portfolio (usually between 10-20)
Bullet Tick Minimum ICR across the portfolio (100%-145%)
Bullet Tick Minimum experience as a landlord (12-24 months)

These restrictions will vary from lender to lender and it should be stressed that there’s lots of lenders who will happily accept applications from portfolio landlords with no specific conditions in place.

So, overall, having experience as a landlord is definitely a positive factor, but the more properties you buy using a mortgage, the tighter some of the requirements may become.

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Other fees and costs to take into account

Arrangement fees for setting up a buy-to-let mortgage are normally higher than for residential mortgages and can vary from lender to lender but are usually anywhere between 1.5%-2% of the mortgage amount.

The good news is your mortgage broker will be able to identify mortgage lenders whose fees are either the lowest or, at least, not prohibitive.

Other fees and costs you should take into account include:

Bullet Tick Valuation fees
Bullet Tick Brokers fees
Bullet Tick Solicitors conveyancing fees
Bullet Tick Letting agents fees (if you decide to use one)
Bullet Tick Stamp duty tax (as outlined above)
Bullet Tick Landlord license fees

Do you need landlords insurance?

It’s not an actual legal requirement but it’s definitely recommended you include a more robust landlord insurance policy, in addition to the standard buildings insurance.

Landlords insurance is basically the equivalent of a home and contents policy you would take out if you bought a residential home but specifically tailored to the needs of a landlord. So, it can also include additional features, over and above buildings cover, such as:

  • Contents insurance (to cover any items/furniture you own in a rented property)
  • Liability insurance (if a tenant or a visitor injures themselves in your property)
  • Rent guarantee insurance (protects you if your tenant falls into arrears)
  • Emergency cover (protects you if the heating/boiler breaks down or there’s an infestation etc.)

Can a low EPC rating affect your chances of getting a buy-to-let mortgage?

Yes, it’s possible. Since 2018, the minimum rating on an Energy Performance Certificate (EPC) for all properties rented out privately should be ‘E’ with further moves afoot to move these guidelines to an even higher rating in the next few years, potentially to a ‘C’.

This does, therefore, make it difficult to get a buy to let mortgage if the property’s EPC rating is lower than this. There are some lenders who are still prepared to consider applications for properties with an EPC rating of either ‘F’ or ‘G’. However, the fines which can be incurred for breaching these rules may make this prohibitive.

In the long run, the best advice would be to search for properties with a higher EPC rating.

Get matched with a buy-to-let mortgage broker

Getting a buy to let mortgage can prove to be quite a tricky process, with lots of information and different considerations to take into account before you proceed.

This is why the shrewdest decision you can make, right from the beginning, is seeking the help of an experienced buy-to-let mortgage broker. Their insider knowledge could prove invaluable and help guide you through the whole process.

Call 0808 189 0463 or make an enquiry and we can arrange a free, no-obligation call with a buy to let mortgage broker with the right experience today.


What’s the difference between buy-to-let and consent to let?

If you know from the outset that your intention is to buy a property to rent out privately then you need a buy to let mortgage. If you originally took out a residential mortgage but, at a later point, want to rent it out for a brief period you can ask your lender for a ‘consent to let’.

Can I change my residential mortgage to a buy to let and buy another house to live in?

Yes, of course you can. There’s lots of cases, similar to that outlined in the question above, where it was never your original intention to rent your property out but, due to circumstances, you’ve become what’s known as an ‘accidental landlord’.

If this is the case, you need to inform your mortgage lender of the circumstances so they can switch from residential to a buy-to-let mortgage. If you don’t do this you could invalidate the terms of your original mortgage, which could result in your lender closing your account and requesting full repayment of the outstanding balance.

That’s the worst case scenario. If you only need to rent out the property for a couple of years, your lender could grant a ‘consent to let’ for this period. But if you think this change will be permanent then you need to switch across to a buy-to-let mortgage.

Can I still claim tax relief on buy-to-let mortgage interest?

Tax relief on mortgage interest has been gradually phased out since 2017 and from April 2020 onwards landlords have been unable to deduct mortgage interest from their rental income before paying their tax bill.

There is some positive news, though, particularly for basic-rate taxpayers as you can still claim a 20% tax credit for your interest payments. If you’re a higher-rate taxpayer, however, this does mean you miss out on an additional 20% as previously you received tax relief equal to 40%.

Ask us a question

We can help! We know everyone's circumstances are different, that's why we work with mortgage brokers who are experts in Buy-To-Let mortgages. Ask us a question and we'll get the best expert to help.

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Pete Mugleston

Pete Mugleston

Mortgage Expert

About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!

FCA Disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms that are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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