What Is a Buy-to-Let Mortgage?
A buy-to-let (BTL) mortgage is specifically designed for people who want to buy property to rent it out, rather than live in it themselves. Lenders see this as a business transaction, which means the rules, costs, and approval process can differ significantly from residential borrowing.
How They Work
- Higher deposit required: Typically 20–25% of the property’s value.
- Interest-only options: Many landlords choose interest-only BTL mortgages to keep monthly payments lower and maximise rental income.
- Rental income matters: Lenders assess whether the expected rent covers the mortgage payments—usually at a rate of 125–145% of the interest payment.
- Limited personal income checks: While lenders do check your finances, they focus more on the rental income potential.
Who Can Get One?
Most lenders require:
- A minimum income (usually around £25,000/year)
- A good credit history
- Proof of deposit and financial stability
You don’t always need to own a home already, but many lenders prefer it. First-time buyers may have more limited options.
Tax and Legal Considerations
- Stamp duty: Buy-to-let properties usually incur a higher rate of stamp duty.
- Tax on rental income: You’ll need to declare rental earnings and may pay income tax.
- Mortgage interest relief: The way landlords can claim mortgage interest as a tax expense has changed—get professional tax advice.
- Licensing and safety: Some properties require landlord licensing or adherence to safety regulations.
Using a Mortgage Adviser Helps
An adviser can identify the best buy-to-let deals, explain your obligations as a landlord, and ensure the property you’re considering meets lender criteria. Some even specialise in property investors and portfolio landlords.
Final Word
Buy-to-let mortgages open the door to property investment—but they come with responsibilities and financial risks. With the right support and a clear understanding of the process, you can make informed decisions and maximise your investment’s potential.
