How to get a buy-to-let mortgage: a simple guide

What is a buy-to-let mortgage?

A buy-to-let (BTL) mortgage is a loan for buying a property that will be rented out to tenants rather than lived in by the owner.

Buy-to-let mortgages usually have higher interest rates and higher fees than standard residential mortgages, and the lending criteria are different.

You can get a BTL mortgage for a property you own as an individual, or you can get a limited company buy-to-let mortgage if you want to own rental properties through a company.

Buy-to-let mortgage explained – 5 key differences

1. The amount you can borrow for buy-to-let depends mainly on the projected rental yield (instead of your income). The expected monthly rental income usually needs to be at least 30 per cent higher than your monthly mortgage payment.
2. Buy-to-let mortgages usually have substantially higher arrangement fees than residential mortgages. Fees tend to be around £1,000 to £5,000.
3. Most buy-to-let mortgages are interest-only, which means you only pay the interest each month rather than paying down the debt, and when you sell the property you repay the capital in full.
4. While homeowner mortgages are regulated by the Financial Conduct Authority (FCA), most buy-to-let mortgages aren’t. This is because they’re seen as business transactions.
5. You may need to own a home already and have been paying your mortgage problem-free for at least 12 months to be approved for a buy-to-let mortgage.

How to get a buy-to-let mortgage in 5 steps

From eligibility to applications and getting a mortgage offer, these are the steps you need to follow:

1. Can I get a buy-to-let mortgage?

Your bank will review your mortgage application based on buy-to-let mortgage criteria. These vary depending on the lender, but include things like age restrictions and a minimum annual income (usually around £25,000).

Barclays has a buy-to-let mortgage calculator you can use to check how much you might be able to borrow and how much your monthly payments might be. You’ll need to fill in details about your income and outgoings here. Download our budget template to get a clear picture of your personal finances.

2. Get an agreement in principle (optional)

You might want to get an agreement in principle before you start your buy-to-let mortgage application. This tells you how much a bank might be willing to lend you, without affecting your credit score.

Sometimes known as a ‘mortgage in principle’, this is a useful gauge if you’re still early on in the house hunting process and are wondering how much money you’ll have for a property. It also shows estate agents you’re a serious buyer.

Bear in mind though, the agreement in principle is usually only valid for 90 days.

3. Contact your bank

The next step is to speak to a bank or mortgage broker to find the best mortgage deal for you. You can book an appointment with them to talk through buy-to-let mortgage rates, affordability, and the different products.

This meeting will kick-start your mortgage application process.

4. Apply for your mortgage

Your mortgage broker or bank will start your mortgage application when you have your first mortgage meeting.

You’ll need to give them lots of information about your finances and the property you want to buy. Existing landlords will also need to show bank statements that show rental income from any other properties.

5. Wait for your mortgage offer

It usually takes between two to four weeks for a mortgage offer to come through. In that time your bank will complete a full credit check and instruct a valuation of the property you want to buy.

Buy-to-let mortgages: how is affordability calculated?

Banks will look at how much rental income you’re likely to make from the property when deciding whether to approve your mortgage application. This is different from residential mortgages, which are based on salary and outgoings.

To help you decide if your property is going to be a good investment, you can estimate rental yield. This is based on how much income you expect to generate in rent every year, as a percentage of the property’s value.

Location is an important factor when it comes to affordability and rental yield. Here are some of the best buy-to-let areas in the UK and the best areas in London for rental yield if location is no object in your property search.

Read our comprehensive guide to buy-to-let mortgage affordability for more information.

Buy-to-let deposit – how much do you need?

Unless you’re a cash buyer then you’ll need to arrange a mortgage. And that means you’ll need a deposit.

A buy-to-let mortgage deposit is usually about 25 per cent of the property’s value – and typically higher than the five to 10 per cent deposit you need for a house you plan to live in.

Buy-to-let mortgage deposit example

Property purchase price = £285,000

25% deposit = £71,250

To secure this property as a buy-to-let, you’d also need to charge monthly rent at around 25-35 per cent more than your mortgage payments.

New-build properties are often treated as ‘riskier’ by lenders, and you may need a minimum of 35 per cent deposit on one of these.

Is interest-only or repayment best for buy-to-let?

You have two options with a buy-to-let mortgage: repayment or interest-only.

A buy-to-let interest-only mortgage means you’ll only pay off the interest each month, so you’ll take home a larger proportion of the rent from your tenants.

A buy-to-let repayment mortgage means you’ll be paying off the amount you owe, plus interest, over the time period agreed in your mortgage.

Both have their pros and cons, but many portfolio landlords choose interest-only mortgages to boost their rental profit. This just means you’ll need to pay off the outstanding balance at the end of your mortgage term.

This article is intended as a guide only. Please get advice from a banking and finance expert if you’re not sure of anything.

How to find the best buy-to-let mortgage rates

Make sure you get the best mortgage rate by following these tips:

• shop around – there are lots of comparison websites out there to help you find the cheapest buy-to-let mortgage and the right product for you
• speak to a mortgage broker – they can offer expert financial advice, help you find a deal that suits your financial circumstances, and often access more products
• choose between a fixed and a variable rate of interest – a fixed rate is usually for two, three, or five years while a variable rate can go up and down
• check your credit score – and try to improve it if you need to

Current buy-to-let mortgage rates – are they going up or down?

Following the financial crisis in 2008, average buy-to-let mortgage rates were low for a long period. This made it a good time to buy a rental property.

This period of low interest rates continued all the way up to the Covid-19 pandemic, when the Bank of England (BoE) base interest rate was cut to a record low of 0.1 per cent.

Since the pandemic, average BTL mortgage rates have started to rise again in line with a higher BoE base rate. Rates spiked as a result of the ill-fated mini-Budget in September 2022. They’ve fallen again since the start of 2024, but remain well above the levels seen in the last 10 years.

Data from moneyfactscompare.co.uk in the table below shows how average BTL mortgage rates increased rapidly between 2022 and 2023 and have started to fall again in 2024.

	Average rate 2-year fixed	Average rate 5-year fixed
February 2024	5.49%	5.48%
August 2023	6.88%	6.72%
February 2022	2.90%	3.16%

Our 2023 Landlord Report found that only two per cent of landlords saw their BTL mortgage repayments decrease between 2022 and 2023. During the same period, 19 per cent saw their monthly payments increase by up to £500 and five per cent saw their monthly repayments increase by more than £1,000.

If you’re in the market for a new deal, it’s worth using a buy-to-let mortgage repayment calculator to see how current rates will impact how much you need to pay each month.

Who are the best buy-to-let mortgage providers?

When shopping around to find the best buy-to-let mortgage deals, you’ll come across a selection of providers.

Some buy-to-let mortgage providers are mainstream lenders while others specialise in BTL.

Here’s a buy-to-let mortgage comparison of the main providers to look out for:

• West One – a specialist lender that offers portfolio lending up to £7.5 million with no minimum income requirements
• Halifax – one of the UK’s best-known lenders offers a range of two and five-year buy-to-let products
• Landbay – a buy-to-let-only lender that offers fixed and tracker buy-to-let mortgages for standard purchases as well as HMOs
• Barclays – a traditional lender that offers products for up to £2 million for each property. To get a Barclays buy-to-let mortgage, you’ll need a minimum annual income of £25,000
• Paragon – a specialist lender that borrowers can only access through an intermediary. It provides products for single properties, HMOs and limited companies
• Lloyds Bank – a traditional lender that offers a range of two and five year products with a maximum loan value of £1 million
• Aldermore – a specialist lender that allows borrowers to include multiple properties on one buy-to-let mortgage application
• The Mortgage Works – the buy-to-let arm of the Nationwide Building Society that offers deals up to 10 years with a maximum loan to value (LTV) of 80 per cent
• HSBC UK – a traditional lender that offers buy-to-let products up to 75 per cent LTV. An HSBC buy-to-let mortgage usually comes with a minimum deposit of 25 per cent

Can I change my existing mortgage to a buy-to-let?

Some landlords start out through chance and circumstance. If you’re moving out of your home but want to keep your property then you might be thinking about letting it out.

The good news is it may be possible to change your existing mortgage to a buy-to-let mortgage. You’ll just need to speak to your mortgage provider and meet their criteria. Sometimes this means you’ll need to remortgage first, which can involve early repayment charges.

Looking for a buy-to-let mortgage? Let us know how you get on in the comments.

More guides for buy-to-let landlords

• How to become a landlord: a guide to renting out a property in the UK
• Landlord checklist – what to do before renting out your property
• How to do a landlord tax return
• What does landlord insurance cover?