BUY-TO-LET MORTGAGES
A buy-to-let mortgage is for purchasing or refinancing a residential property you intend to let to tenants. Lenders may consider expected rental income alongside your wider circumstances and their own criteria.
Your home may be repossessed if you do not keep up repayments on your mortgage.
HOW BUY-TO-LET WORKS
Buy-to-let mortgages are different from ordinary residential mortgages. The property, expected rent, deposit, mortgage costs and lender criteria can all shape the options that may be available.
01 — Work out your budget and deposit
Allow for your deposit, buying costs and ongoing property expenses.
02 — Consider the property and expected rent
The property and anticipated rental income can form part of the lender’s assessment.
03 — Understand lender criteria
Criteria can differ between lenders and may include rental income, property type and your wider finances.
04 — Consider mortgage options and costs
Interest rates, product fees, repayment method and other features may all be relevant.
05 — Apply for the mortgage
The lender assesses the application and decides whether it is prepared to lend.
After completion, the property can be let in line with the mortgage terms, legal requirements and your plans.
BUY-TO-LET AFFORDABILITY
Buy-to-let affordability can be assessed differently from a residential mortgage. Lenders may consider expected or existing rental income, their own rental coverage requirements, how the borrowing might perform under stress assumptions, personal income where relevant, existing borrowing and property commitments, and the property and circumstances of the application. Criteria vary between lenders.
Rental income does not guarantee mortgage affordability
The lender’s assessment and other criteria still apply. There is no universal rental coverage percentage, stress rate or calculation that applies to every buy-to-let mortgage.
DEPOSITS AND LOAN-TO-VALUE
Loan-to-value, or LTV, is the percentage of the property’s value being borrowed. Lower borrowing relative to the property’s value means a lower LTV. Lender requirements and available products vary by lender, property and circumstances, so there is no universal minimum deposit.
REPAYMENT ARRANGEMENTS
Buy-to-let mortgages can have different repayment structures. Interest-only borrowing is common in this market but is not automatically appropriate. With an interest-only mortgage, monthly payments generally do not repay the original capital and an acceptable repayment strategy is required.
COSTS TO PLAN FOR
What does a buy-to-let mortgage really cost?
The mortgage payment is only one part of the economics of owning a rental property. The costs that apply, and their amount, depend on the property, mortgage and your circumstances.
Mortgage costs
Product or arrangement fees, valuation costs and mortgage advice fees where applicable.
Purchase costs
Legal or conveyancing costs and relevant property transaction taxes.
Property costs
Insurance, maintenance and repairs needed to keep the property in good order.
Letting costs
Letting or management costs where applicable.
Vacancy and unexpected costs
Periods without a tenant and unforeseen expenditure can also affect the overall picture.
PREPARING YOUR APPLICATION
Requirements vary by lender and circumstances. These are examples of information you may be asked to provide.
Identification and address evidence
Income and financial information where required
Details of the property
Expected or existing rental income
Evidence of deposit
Details of existing mortgages or properties where relevant
Company information where purchasing through a company
OWNERSHIP AND COSTS
Some landlords buy personally, while others use a limited company. Ownership structure can affect mortgage availability, lender criteria, mortgage pricing and fees, administration, taxation and legal responsibilities. Neither route is automatically better for everyone, and appropriate tax and legal advice may be important before deciding.
Personal ownership
A buy-to-let mortgage held in an individual’s name is one possible ownership structure. Mortgage availability and lender criteria can vary.
Limited-company ownership
Some lenders offer mortgages to limited companies. Administration, mortgage products, pricing and fees can differ from personal ownership.
Choosing a structure
Taxation and legal responsibilities can differ. This page is introductory only and does not provide tax or legal advice.
First-time landlords
Can a first-time landlord get a buy-to-let mortgage?
Some lenders consider first-time landlords, while criteria vary. A first-time landlord and a first-time property buyer are not necessarily the same thing, and lender treatment can differ. Being new to letting does not guarantee mortgage availability or acceptance.
REVIEWING A BUY-TO-LET MORTGAGE
Can I remortgage a buy-to-let property?
Landlords may consider remortgaging for different reasons, but eligibility, costs and suitability need consideration. A remortgage does not necessarily save money.
SUPPORT WITH YOUR OPTIONS
Can a mortgage adviser help with buy-to-let?
Buy-to-let lender criteria and assessment methods vary. An adviser may help you understand mortgage options within the scope of their service. This does not guarantee mortgage availability or acceptance.
How are buy-to-let mortgages regulated?
Most buy-to-let mortgages are not regulated by the FCA in the same way as residential mortgages, although some arrangements can fall within regulated consumer buy-to-let rules depending on the circumstances. An appropriate adviser can help establish the position relevant to you where needed.
COMMON QUESTIONS
Buy-to-let mortgage FAQs
Concise answers to common questions about buy-to-let mortgages.
How does a buy-to-let mortgage work?
How much deposit do I need for a buy-to-let mortgage?
How do lenders assess buy-to-let affordability?
Can a first-time landlord get a buy-to-let mortgage?
Can I buy a rental property through a limited company?
Are buy-to-let mortgages regulated?
READY TO TALK TO AN ADVISER?
MortgageAdvice.co.uk can connect you with a selected mortgage adviser who can discuss your circumstances and mortgage requirements.
No obligation to proceed.
Your home may be repossessed if you do not keep up repayments on your mortgage.
MORTGAGE GUIDES
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