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        Buy to Let Mortgage Deposits

        Trying to find how much deposit you'll need for a buy to let mortgage? Find out the minimum amounts and exactly what you need to do next in our expert guide!

        Firstly, which of the below best applies to your situation?

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        Pete Mugleston

        Author: Pete Mugleston - Mortgage Expert, MD

        Updated: March 10, 2022

        The criteria to access buy-to-let mortgages vary in comparison to residential. In particular, the deposit requirements are different and can significantly impact what property you can afford. 

        If you’re considering purchasing a property to rent out, this guide will help you understand what deposit you will likely need, how this affects your chances of getting the best deals and where to look for the right advice.

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

        On average, a typical buy-to-let deposit needs to be at least 25% of the house price. Regular mortgage deposits are much lower than that – around 10%.

        If you’re surprised at how much higher the typical buy-to-let deposit is, requiring 25% upfront is not a hard and fast rule. Some lenders will lower the deposit amount needed if your application is strong across other areas of eligibility.

        How to work out your loan-to-value (LTV)

        You can use our calculator below to work out how much your loan-to-value will be on the buy-to-let property you’re looking to purchase. The higher deposit you have available, the better chance you have of qualifying for the most competitive interest rate offers.

        calculator icon

        LTV Calculator

        This calculator will tell you what your loan-to-value (LTV) ratio is, based on the property's value, your deposit/equity and the amount you're borrowing.


        Enter an amount in pound sterling
        £
        Property value minus your deposit/equity
        £
        Loan amount must be less than property value

        Your LTV is

        This means that most mortgage providers will consider your deposit amount to be more than satisfactory, but speaking to a broker is still recommended to ensure you get the best deal.

        This means you’re likely to meet the deposit requirements at most lenders, but since many reserve their best rates for those with higher deposits, speaking to a broker is recommended.

        Many mainstream mortgage providers would consider this high and be reluctant to lend. Applying through a mortgage broker may be necessary to find a specialist low deposit mortgage lender.

        LTVs have a direct impact on the rates available to you - speak to a mortgage broker and find out how to get the best deal based on your ratio.

        Why do buy-to-let mortgages have higher deposit requirements?

        Buy-to-let mortgages are perceived as a higher risk by lenders. This perception lies in the potential for tenants not paying their rent, long periods of dormancy between lettings or unexpected maintenance costs.

        This is where a mortgage broker we work with could really help. They understand the buy-to-let market inside out and so will know what lenders to approach should your deposit be a little on the low side.

        How rental income affects the amount you’ll need

        One factor that can affect the size required for buy-to-let deposits is the rental income you will receive from your newly purchased property. Mortgage lenders look at the potential rental income to ensure that it more than covers the mortgage repayments.

        In practice, mortgage lenders often like to see a rental payment that is between 125% and 145% of the mortgage. This is often referred to as the Interest Cover Ratio (ICR).

        The ICR is how lenders calculate the affordability of a mortgage for a person. The larger the deposit amount you put down, the more affordable a mortgage is for you.

        Get Started with a Broker

        Maximise your chance of approval with specialist advice from a mortgage expert.

        How a mortgage broker can help

        While buy-to-let mortgages are highly dependent on deposit amounts, the list of other eligibility requirements means there are other variables which affect the chances of a successful application.

        It makes it hard even for an experienced landlord to find the best mortgage for them.

        This is where we can help. The brokers we work with can use their experience of arranging buy-to-let mortgages to help you identify the right lender who will look more favourably on the amount of deposit you’re able to provide.

        If you get in touch we will arrange for an advisor to contact you directly.

        Factors that could affect your application

        Your deposit is just one key element a lender will consider when assessing your application. The following factors will also determine whether you’ll be able to secure the borrowing you need:

        Credit history

        If you’re looking for a BTL mortgage and have bad credit history, there will be fewer lenders who will accept you. That’s because lending to you is seen as riskier and so, to compensate for that, mortgage lenders may want a higher deposit amount.

        Age

        Ordinarily, lenders are less likely to offer a mortgage to a person over 75. But, it’s not set in stone.

        On the other end of the scale, the youngest age that providers want applicants to be is 18. However, some require applicants to be older. If your age sits outside the preferred parameters for a mortgage lender, again, they may want a higher deposit amount.

        Type of property

        Another factor that will likely require a higher deposit is if you are looking for a mortgage on a holiday home or houses with multiple occupants (HMOs). Many mortgage providers prefer to see properties let out under a short term tenancy.

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        Other types of buy-to-let deposits

        The most common source of a deposit will come from personal savings.

        However, other types of deposit can represent more of a challenge for you to secure the mortgage you need, such as:

        Builder deposit

        Sometimes builders, as a way to encourage people into buying properties they have built, may agree to cover the deposit needed for a mortgage. Not all lenders will allow this source, however.

        Gifted equity

        Increasingly, people are given money for a deposit to buy a house. It is commonly known as the Bank of Mum and Dad, but not all equity for deposits need to come from a parent. It could be from another family member or individual.

        Additionally, another form of gifted equity is known as a concessionary purchase. This is when a family member agrees to sell a property at a discounted price. The discount is what some lenders are happy to see as a deposit.

        Capital from property

        Landlords who own multiple properties may have set up their own Ltd company. Some lenders, for example, will allow a landlord to use another one of the properties from their portfolio as a form of collateral for a new mortgage.

        Get matched with an expert buy to let mortgage broker today

        To make sure you get the best buy-to-let mortgage, regardless of the deposit you have, it’s highly beneficial to work with a broker who has the right knowledge in this area.

        The mortgage brokers we work with have many years’ experience that will help you access the most competitive rates possible, with the best terms.

        Our broker matching service will help you find the most suitable broker for your needs.

        Give us a call on 0808 189 0463 or make an enquiry to set up a free chat with a buy-to-let specialist with absolutely no obligation to proceed.

        Get Started with a Broker

        Maximise your chance of approval with specialist advice from a mortgage expert.

        FAQs

        It’s possible but would be very difficult.

        Some lenders may be more open to this for landlords who have other buy-to-let properties where it’s possible to release equity from within their portfolio or provide collateral for a new purchase.

        Ask A Quick Question

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

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        Pete Mugleston

        Pete Mugleston

        Mortgage Expert, MD

        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.