Updated: December 14, 2021

How to Get a Buy-to-Let Mortgage in Scotland

Looking for a buy-to-let mortgage in Scotland? Read through our guide to find out all you need to know about BTL north of the border.

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Pete Mugleston

Author: Pete Mugleston - Mortgage Expert

Updated: December 14, 2021

Buy-to-let (BTL) mortgages are usually the go-to option for people who want to invest in rental property, but what’s the situation if you’re looking for one in Scotland?

In this comprehensive guide, you’ll learn how Scotland’s buy-to-let market differs from the rest of the UK, what criteria you’ll need to meet to qualify for an investment mortgage there, how the right mortgage broker can help you achieve your goals, and much more.

Can you get a buy-to-let mortgage in Scotland?

Yes, and the application process for a buy-to-let mortgage in Scotland and the rules surrounding them are broadly similar to England and the rest of the UK. One thing to keep in mind, though, is that there are fewer lenders to choose from in Scotland, so mortgage approval and securing the best interest rate can be more difficult if you’re unfamiliar with the market.

How buy to let is different north of the border

Buy-to-let mortgages in Scotland work exactly the same way as they do in England, Wales and Northern Ireland, but there are specifics you need to know about if you’re buying an investment property to let to tenants north of the border.

The main points to be aware of are…

  1. Geographic restrictions: It’s harder to get a buy-to-let mortgage in some Scottish postcodes compared to others. If the property you’re buying is in the Highlands or off the mainland, your choice of lenders will be slimmer and expert advice is recommended.
  2. Right to Rent: Landlords in England and Wales are legally obliged to make sure their tenants have the legal right to rent from them, but this does not apply in Scotland.
  3. Land and Building Transaction Tax: Landlords in Scotland no longer pay Stamp Duty, but have Land and Building Transaction Tax bills to foot instead. An Additional Dwelling Supplement of 4% may also be payable on investment properties and second homes.
  4. Home Reports: Home Reports are required by Scottish law before a property can be sold on the open market. You can read through the seller’s home report for an overview of the quality of the property before you commit to buying it. Reports are split into three parts: a single survey and valuation, a property questionnaire and an energy report.
  5. Specialist mortgage brokers: There are mortgage brokers who specialise in the Scottish buy-to-let market. They have deep working relationships with lenders there and sometimes have access to exclusive deals, so it pays to work with one of them.

Popular buy-to-let hotspots

According to Zoopla’s data on rental returns across Britain, five out of the UK’s top 10 rental hotspots are in Scotland. East Ayrshire, North Ayrshire and Inverclyde were the top performers with average rental yields of 7.7%, with Glasgow and Stirling coming in at slightly below that.

The rental yield is calculated based on how much rent your property can generate offset against the amount you’d pay for it. Anything over 7% is considered a strong rental yield.

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How to get a buy-to-let mortgage in Scotland

We’ve broken the process down into three simple steps to help you get your buy-to-let mortgage application off on the best possible track…

  • Get your paperwork prepared: You’ll need proof of rental income, a mortgage statement for your current residence, three months’ bank statements and other documents to support your application.
  • Check the Home Report: Reading through the Home Report for the property you’re buying before you press ahead will give you a good idea of what kind of condition it’s in. This will allow you to pre-empt any problems that might come to light further down the line, and potentially even knock the seller down on the asking price.
  • Speak to a mortgage broker: There are brokers who specialise in buy-to-let mortgages in Scotland, and speaking to one before you apply could save you time and money. They know exactly which lenders offer mortgages for rental properties north of the border, and sometimes have access to broker-exclusive deals that aren’t available to the public.

We offer a free broker-matching service that will quickly assess your needs and circumstances to match you with the right broker, in this case, an advisor that we’ve handpicked because they specialise in Scottish buy to let and have a strong track record helping customers like you.

Make an enquiry to get started with your ideal mortgage broker today.

What eligibility criteria you’ll need to meet

Scotland doesn’t have its own eligibility criteria for buy-to-let mortgages, so the requirements you’ll need to meet to qualify for one are the same as they are in England.

Below you’ll find a breakdown of the lending criteria…

Affordability:
Landlord experience:
Credit history:
Homeownership:

This will be assessed based on the property’s projected rental income. Most lenders will need it to amount to at least 125% of the mortgage payments. Some lenders also have personal income requirements and won’t offer you a mortgage unless you’re earning at least £25,000 per year from work outside of your landlord business.

It’s much harder to get a buy-to-let mortgage in Scotland without landlord experience. There are lenders who offer them to first-time buyers, but having owned a buy-to-let property before will nearly always help your cause.

There are bad credit buy-to-let mortgages available in Scotland, but having clean credit – or at least no severe credit issues – will usually help boost your chances of securing a good mortgage deal for an investment property.

Most lenders who cover Scotland will only offer you a buy-to-let mortgage if you’ve owned your own home for at least six months.

After you’ve secured your buy-to-let mortgage, it’s a legal requirement that you register as a landlord in Scotland before you start letting the property to tenants. You can do this online via the Scottish Landlord Register or by contacting your local council’s housing department.

How much deposit you’ll need

Deposit requirements for buy-to-let mortgages in Scotland are usually the same as they are in England and the rest of the UK. You’ll need a deposit worth anywhere between 20% and 25% of the property’s value to get approved for finance, under most circumstances.

The deposit requirements might be higher if you have bad credit or any other risk factors are present. On the flipside, it may be possible to get a buy-to-let mortgage with less deposit than this if you’re an experienced landlord with a strong track record in the industry.

How to get the best rates

At the time of writing, interest rates on buy-to-let mortgages in Scotland are generally the same as they are in England. There are fixed-rate deals available with introductory rates of just over 1% but the lenders offering them have a standard variable rate (SVR) of over 3% at the lowest end of the market, and over 5% if we’re talking about average SVR rates.

Keep in mind that rates can change at any time and doing some research into them online and approaching a lender you found after a quick Google search is not recommended.

Speaking to a mortgage broker who specialises in buy to let in Scotland is better than going solo, as it will open up an entire market of products to you. The brokers we work with have deep working relationships with BTL mortgage providers in Scotland and often have access to exclusive rates and deals that are not accessible to the general public.

Are things any different for limited companies?

Yes, there are extra considerations for borrowers who trade as a limited company. Firstly, most experts would recommend that your limited company is set up as a special purpose vehicle (SPV) if you’re buying a buy-to-let property through it, as your choice of lenders might be higher.

Moreover, there are tax benefits to buying property through a limited company and some landlords prefer it, since it helps separate their investment properties from their own homes.

Some lenders specialise in limited company buy-to-let mortgages, while others don’t, so the provider you approach can be the difference between disappointment and landing a good deal.

You can read more about this in our complete guide to limited company buy-to-let mortgages.

Get matched with the right buy-to-let mortgage broker for the Scottish market

The best way to land a great buy-to-let mortgage deal in Scotland is to use a broker who specialises in that market. They will have the knowledge, experience and lender contacts to make sure that you secure the best rates and terms that you qualify for.

We offer a free, broker-matching service that will quickly assess your needs and circumstances to pair you with the mortgage advisor who’s best placed to help you get a buy-to-let mortgage in Scotland. This will be somebody with deep knowledge of the market there and a strong working relationship with the lenders you’d need to approach to get the mortgage you need.

Call 0808 189 0463 or make an enquiry and we’ll set up a free, no-obligation chat between you and your ideal buy-to-let mortgage broker today.

FAQs

How much Land and Building Transaction Tax will I pay?

The table below reveals how much Land and Building Transaction Tax you would need to pay on a Scottish buy-to-let property under the current tax rates…

Property Price Land and Building Transaction Tax Rate
Less than £40,000 0%
£0 to £145,000 3%
£145,001 to £250,000 5%
£250,001 to £325,000 8%
£325,001 to £750,000 13%
£750,001 or more 15%

If the price of your property is between £40,000 and £145,000, 3% tax will be charged on the full property price.

How do I prove the rental income on the property I’m buying?

You’ll need to request a rental income forecast from an ARLA – approved letting agent. This doesn’t need to be an agent based up in Scotland, but there are letting agents who operate exclusively in the country, if using a local one is your personal preference.

Do I need landlord insurance?

Landlord insurance is not a legal requirement for buy-to-let property owners in Scotland, but most experts would recommend taking out some form of protection insurance to safeguard yourself. A broker can help you choose the right type of insurance for your needs.

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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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