Advice
Can I get a Buy To Let mortgage?
Yes, you may be able to get a Buy To Let mortgage if you have a suitable deposit, the expected rent supports the borrowing, your finances meet the lender’s criteria and the property is acceptable.
It is not simply a residential mortgage on a home you plan to rent out. Lenders assess Buy To Let applications differently, and becoming a landlord brings costs, tax considerations and legal responsibilities.
What is a Buy To Let mortgage?
A Buy To Let mortgage is designed for a property that will be rented to tenants rather than occupied as your main home.
Using a standard residential mortgage for a rental property without your lender’s permission could breach your mortgage terms. If you already own a home and decide to rent it out, contact your lender. It may offer consent to let temporarily or require an appropriate Buy To Let mortgage.
Can I get a Buy To Let mortgage? The main checks
Every lender sets its own rules, but most will consider the following.
Your deposit
Buy To Let mortgages commonly require a larger deposit than residential mortgages. A deposit of around 25% is often quoted as a useful starting point, although products with lower or higher requirements may be available.
The deposit needed can depend on the property, expected rent, your experience, credit history and whether you apply personally or through a limited company. Keep money aside for tax, legal work, fees, repairs, safety checks and periods when the property is empty.
The expected rental income
With a residential mortgage, affordability is mainly based on the applicant’s income and spending. For Buy To Let, lenders usually place significant weight on the rent the property is expected to achieve.
They normally require the rent to cover the mortgage interest by a set margin. This is often called the interest coverage ratio, or ICR. The lender may test the calculation using an assumed interest rate higher than the initial mortgage rate.
The required coverage and test rate vary. Your tax position, mortgage product and application structure can affect the calculation. A lender may rely on its valuer’s rental estimate rather than the figure suggested by a letting agent.
Your personal income and finances
Rental income may be central, but lenders can still consider:
Employment or self-employed income
Existing mortgages, loans and credit commitments
Credit history
Age and the proposed mortgage term
Cash reserves
Experience as a landlord
The number of rental properties you own
Some lenders set a minimum personal income; others do not. Lower or irregular income and previous credit problems can reduce the products available without necessarily making an application impossible.
Your current housing position
Many lenders prefer applicants who already own their home. However, some consider first-time buyers or first-time landlords.
A first-time buyer may face fewer lender choices and closer affordability checks. Buying an investment property first can also affect the tax treatment or relief available on a later home purchase, so obtain tax and legal advice before deciding.
The property and tenants
Criteria can be tighter for houses in multiple occupation, multi-unit properties, holiday lets, flats above commercial premises, unusual construction, properties needing substantial work, tenancies involving close family and properties subject to licensing restrictions.
A standard Buy To Let mortgage will not cover every letting model. Explain exactly how the property will be used before applying.
How is a Buy To Let mortgage different?
The key differences are:
Purpose: a residential mortgage is for your home; Buy To Let is for a property rented to tenants.
Assessment: residential affordability focuses mainly on your income and spending; Buy To Let borrowing depends heavily on expected rent, alongside other checks.
Deposit: Buy To Let commonly requires a larger deposit.
Repayment: interest-only is common in Buy To Let, although repayment options exist.
Regulation: many business Buy To Let mortgages are not regulated in the same way as residential mortgages. Consumer Buy To Let rules can apply in certain circumstances.
With an interest-only mortgage, your monthly payments do not reduce the original loan. You need a credible plan to repay the capital at the end. Selling the property may form part of that plan, but its future value is not guaranteed.
A simple rental coverage example
Suppose a property costs £200,000 and you provide a £50,000 deposit. You would need a £150,000 mortgage.
The lender will not necessarily approve that amount just because you have a 25% deposit. It will compare the expected monthly rent with its own ICR and stress-rate calculation. If the rent is too low, you may need to provide a larger deposit, borrow less or consider a different property.
This is why checking likely rent and mortgage criteria before making a binding commitment can be valuable.
Costs and risks to check before applying
Rental income is not profit. Your budget should include:
Mortgage payments
Letting and management fees
Maintenance and emergency repairs
Buildings and landlord insurance
Safety checks, licences and compliance costs
Service charges and ground rent where applicable
Tax and accountancy costs
Empty periods and unpaid rent
Tax treatment depends on where the property is, whether you already own property and whether you buy personally or through a company. In England and Northern Ireland, higher Stamp Duty Land Tax rates can apply to additional residential properties. Scotland and Wales use different property taxes.
Individual residential landlords cannot generally deduct all finance costs from rental income in the same way as an ordinary business expense; a basic-rate tax reduction applies instead. Tax rules can change, so speak to a qualified tax adviser before choosing an ownership structure.
Property values and rents can fall as well as rise. You remain responsible for the mortgage during vacant periods or if a tenant does not pay.
How to prepare for a Buy To Let application
Before applying:
Work out your full cash budget, not just the deposit.
Obtain evidence of realistic market rent.
Review your credit reports and correct genuine errors.
Gather proof of income, deposit and existing commitments.
Check whether the property or tenancy needs specialist lending.
Compare interest-only and repayment costs.
Stress-test the figures for higher rates, repairs and empty months.
Take tax and legal advice on personal versus company ownership.
Avoid a non-refundable commitment until the finance position is understood.
When can a mortgage adviser help?
Buy To Let criteria differ considerably between lenders. An adviser can assess how your deposit, expected rent, income, credit history, property type and landlord experience fit relevant criteria.
This can be especially useful if you are a first-time landlord, applying through a limited company, buying an HMO, letting to family, expanding a portfolio or dealing with adverse credit.
My Simple Mortgage can discuss your plans, explain the likely assessment and help you understand the next steps. Any recommendation will depend on your circumstances and the products available at the time.
Frequently asked questions
Can I get a Buy To Let mortgage as a first-time buyer?
Possibly. Some lenders consider first-time buyers, but the choice may be narrower and additional affordability checks can apply.
Can I live in my Buy To Let property?
A standard Buy To Let mortgage is intended for tenants, not for you to use as your home. Tell the lender or adviser if you plan to occupy the property.
Can I get a Buy To Let mortgage with bad credit?
It may be possible, depending on what happened, how recent it was and the rest of the application. You may face fewer products, a larger deposit or higher costs.
Can I use a residential mortgage and rent the property out?
Not without the lender’s agreement. Ask about consent to let or an appropriate Buy To Let mortgage before renting the property.
Your home may be repossessed if you do not keep up repayments on your mortgage.
My Simple Mortgage Ltd T/A My Simple Mortgage is an Appointed Representative of Stonebridge Mortgage Solutions Ltd, which is authorised and regulated by the Financial Conduct Authority. My Simple Mortgage Ltd is registered in England and Wales with company number 09275345. Registered office: The Mount, Etruria Road, Newcastle-under-Lyme, Staffordshire, ST5 0SU. The guidance and/or advice contained within this website is subject to the UK regulatory regime and is therefore targeted at consumers based in the UK. Your home may be repossessed if you do not keep up repayments on your mortgage. The Financial Conduct Authority does not regulate some forms of Buy To Lets.