Buy-to-Let Mortgages Explained: A Complete Guide for Landlords

How buy-to-let mortgages differ from residential mortgages

Buy-to-let mortgages are specifically designed for properties you intend to rent out rather than live in. They work differently from residential mortgages in several important ways:

Affordability assessment — rather than being based primarily on your personal income, buy-to-let affordability is assessed on the expected rental income. Lenders typically require the rent to cover 125–145% of the mortgage payment at a stressed interest rate (usually 5–5.5%). This is known as the rental coverage ratio or interest coverage ratio (ICR).

Deposit requirements — most buy-to-let lenders require a minimum 25% deposit, compared to 5% for residential mortgages. Some specialist lenders will consider 20%, but 25% is the standard minimum.

Interest-only — most buy-to-let mortgages are interest-only, meaning you only pay the interest each month and repay the capital at the end of the term (usually by selling the property or remortgaging). This keeps monthly payments lower and maximises rental yield.

Rates and fees — buy-to-let mortgage rates are typically higher than residential rates, and arrangement fees can also be higher.

How rental coverage works

The rental coverage calculation is the key to buy-to-let affordability. Here's how it works:

If the mortgage payment at the stressed rate is £1,000 per month, and the lender requires 125% coverage, the minimum rental income required is £1,250 per month.

This means you need to know the expected rental income before you can assess whether a property will be mortgageable. I'll run this calculation for you before you make an offer.

Personal income requirements

Most buy-to-let lenders also have a minimum personal income requirement — typically £25,000–£30,000 per year. This ensures you can cover the mortgage from your own income if the property is vacant.

Some lenders have no minimum income requirement, but these are typically specialist lenders with higher rates.

Limited company buy-to-let

Since changes to mortgage interest tax relief (Section 24), many landlords now purchase through a limited company (typically a Special Purpose Vehicle, or SPV). This can offer significant tax advantages, particularly for higher-rate taxpayers.

The buy-to-let mortgage market for limited companies has grown significantly, and competitive rates are now available. However, rates are typically slightly higher than personal name mortgages, and you'll need to set up a company before applying.

I'd always recommend speaking to a tax adviser before deciding on your structure — but I can explain the mortgage implications of both approaches.

Stamp duty for buy-to-let

Buy-to-let properties attract an additional 3% stamp duty surcharge on top of the standard rates. Use our stamp duty calculator to calculate your exact liability.

Is buy-to-let still a good investment?

This is a question I'm often asked, and it's one I can't answer for you — it depends on your personal financial situation, your investment goals, and your view of the property market. What I can do is help you understand the mortgage side of the equation clearly, so you can make an informed decision.

var(--inspire-text)]">Thinking about your first investment property? [Check your eligibility or book a free call to discuss your plans.