Buy-to-Let Mortgages (2026): How They Work, Deposits & What Lenders Look For
A buy-to-let mortgage is a loan for a property you rent out rather than live in — and it plays by different rules: bigger deposits, rental-income tests, and interest-only as the norm. Here’s how BTL lending actually works, what it costs, and who can get one in 2026.
Quick Answer
A buy-to-let (BTL) mortgage is a mortgage for a property you intend to rent out. Unlike a residential mortgage, the lender’s main question isn’t your salary — it’s whether the rent will comfortably cover the mortgage payment, typically by 125–145% under a stressed interest rate. You’ll usually need a deposit of at least 20–25%, and most landlords choose interest-only repayments to keep monthly costs down.
Rates and fees run higher than residential deals, and renting out a home on a normal residential mortgage without permission breaches your mortgage terms. Your property may be repossessed if you do not keep up repayments on your mortgage.
On this page
What Is a Buy-to-Let Mortgage?
A buy-to-let mortgage is a loan secured on a property you’re buying (or already own) as a rental investment rather than a home. The core deal is the same as any mortgage — borrow against the property, repay over a term — but almost everything around it differs, because the lender is underwriting a small business, not a household:
- The rent is the income that matters. Lenders assess the property’s rental value first, your personal income second.
- Deposits are bigger and rates higher than residential deals, reflecting the added risk of tenants, voids and market swings.
- Interest-only is normal, not the exception — more on why below.
- Most BTL lending isn’t FCA-regulated in the way residential mortgages are (it’s treated as a business transaction), though “consumer buy-to-let” — such as letting out a home you inherited — is. Either way, advice from a regulated broker is how you compare the market properly.
You cannot simply rent out a home that’s on a normal residential mortgage — that breaches your terms. If your plans have changed, see let-to-buy and consent to let below, because there are proper routes for exactly that situation.
How Buy-to-Let Lending Works: The Rent Test
The heart of every BTL application is the interest coverage ratio (ICR) — the lender’s check that the rent comfortably exceeds the mortgage payment. In practice:
- The lender takes the property’s expected monthly rent (confirmed by their valuer, not just your estimate).
- They calculate your mortgage payment at a stressed interest rate — higher than the rate you’ll actually pay — to test resilience.
- The rent must typically cover 125–145% of that stressed payment. Basic-rate taxpayers usually sit at the lower end, higher-rate taxpayers at the top.
This is why “how much can I borrow?” works backwards on buy-to-let: the rent decides the loan size, not your salary. A property renting for more supports a bigger mortgage; if the rent falls short of the ICR, you’ll need a bigger deposit to shrink the loan — regardless of how much you earn. Most lenders also want to see a minimum personal income (commonly around £25,000) as a backstop for void periods.
Working out your numbers
The maths — rent needed, maximum loan, deposit required, stress-test headroom — is exactly what a buy-to-let calculator does, and a full calculator guide is coming to this hub. In the meantime, a broker will run the numbers across real lenders in minutes, which matters because stress rates and ICRs vary between them: the same property can support very different loan sizes from lender to lender.
How Much Deposit Do You Need for a Buy-to-Let?
Plan for at least 20–25% of the purchase price — the practical minimum for most of the BTL market — with the best rates typically reserved for 40%+ deposits. Two forces set your real number:
- Lender maximums: most BTL lending caps out at 75–80% loan-to-value, so 20–25% down is the entry ticket.
- The rent test: even where a lender allows 75–80% LTV, the ICR can force a bigger deposit if the rent won’t stretch to cover the loan — common in lower-yield areas.
Where does the deposit come from? Savings, of course — but many landlords raise it from equity in their existing home, either by remortgaging to release funds or, if they’re protecting a good existing rate, with a second-charge mortgage. Both routes are standard practice; which is cheaper depends on your current deal, and it’s a comparison a broker can run alongside the BTL application itself.
Interest-Only vs Repayment: Why Landlords Choose Interest-Only
Interest-only (the BTL norm)
You pay only the interest each month; the loan itself is repaid when you sell (or remortgage) at the end. Monthly costs are far lower, which maximises rental profit and ICR headroom — the reason most landlords choose it. The trade-off: the debt never shrinks, and you need a credible plan to repay it.
Repayment
Each payment chips away at the loan, so you build equity and own the property outright by the end. Monthly costs are higher and yields look worse on paper — but it suits landlords playing the long game who want the asset debt-free, and it removes the “how do I repay the balance?” question entirely.
Neither is universally right — it’s a strategy choice about cash flow now versus equity later, and it interacts with tax. Like residential borrowers, landlords also choose a deal type: most take a fixed rate for the same reason homeowners do — a predictable payment against a fixed rent — and remortgage to a new deal when it ends, exactly as with a residential loan.
Who Can Get a Buy-to-Let Mortgage?
Typical criteria across the market — individual lenders vary, which is precisely where a broker earns their fee:
- Deposit: 20–25% minimum, as above.
- Minimum income: commonly around £25,000 personal income, though some lenders have no minimum.
- Age: BTL is notably flexible on age — many lenders accept older borrowers and long terms, since the rent (not a salary) services the loan.
- Homeownership: most lenders prefer you to own your own home already. It’s possible as a first-time buyer, but the lender pool shrinks and scrutiny rises.
- Credit history: clean credit gets the best pricing; adverse credit doesn’t rule you out, but pushes you toward specialist lenders at higher rates.
One structural decision to know about before you apply: many landlords now buy through a limited company rather than personally, mainly for tax reasons — mortgage interest is treated differently, at the cost of slightly higher rates and running a company. It’s a genuine fork in the road that deserves its own guide (coming to this hub) and, in the meantime, proper advice — the right answer depends on your tax band and long-term plans.
Buy-to-Let Costs, Fees & Tax: What to Budget For
| Cost | What to expect |
|---|---|
| Interest rate | Higher than equivalent residential deals — the risk premium of lending against rent. |
| Arrangement fees | Often chunkier than residential — sometimes charged as a percentage of the loan rather than a flat fee. Always compare total cost, not headline rate. |
| Stamp duty surcharge | Additional properties attract a surcharge on top of standard stamp duty rates, on the whole purchase price — a major upfront cost. (The surcharge level is set by government and has changed over time; confirm the live figure before you offer. First-time-buyer relief does not apply to a property you won’t live in.) |
| Income tax on rent | Rental profit is taxable, and individual landlords receive only a basic-rate credit for mortgage interest — a key driver of the limited-company trend. Tax advice is worth its cost here. |
| Running costs | Landlord insurance, maintenance, letting agent fees, safety certificates, and void periods where no rent comes in. Seasoned landlords budget a slice of rent for these from day one. |
Let-to-Buy and Consent to Let: When Your Home Becomes the Rental
Two situations get confused with buy-to-let constantly, and they matter because renting out your home on a residential mortgage without permission breaches your mortgage conditions:
Let-to-buy
You keep your current home, convert its mortgage to a buy-to-let, rent it out — and simultaneously take a new residential mortgage on the home you’re moving to. Effectively buy-to-let in reverse, done as one coordinated transaction. Great when you can’t (or don’t want to) sell before moving; it does mean owning two properties, with the surcharge that entails.
Consent to let
The temporary version: your existing residential lender gives you written permission to rent your home out for a period — useful for a work relocation or a slow sale — usually with a fee or small rate loading. It’s a stopgap, not a strategy: for the long term, lenders expect you to switch to a proper buy-to-let mortgage.
Both are well-trodden paths with their own lender quirks — if your situation is “I already own the property and my plans changed,” say exactly that to a broker and they’ll route you correctly.
The bottom line
Buy-to-let is a business decision wearing a mortgage’s clothes: the rent drives the loan, the deposit is 20–25% plus, interest-only is the norm, and the real costs — surcharge, tax, voids, maintenance — sit outside the mortgage itself. The numbers can absolutely work, but they’re your numbers: yield, tax band, structure and stress-test headroom differ property by property and lender by lender.
Compare mortgage deals and we’ll match you with an FCA-regulated broker who can stress-test your figures across the buy-to-let market — free, with no obligation.
Frequently Asked Questions
How much deposit do you need for a buy-to-let mortgage?
Typically at least 20–25% of the purchase price — most buy-to-let lending is capped at 75–80% loan-to-value. The best rates usually sit at 40% deposits and above. The rent test can push the required deposit higher still: if the expected rent won’t cover the lender’s stressed payment by the required margin, you’ll need to borrow less and put down more, regardless of your income.
How much can I borrow on a buy-to-let mortgage?
It’s driven by the rent, not your salary. Lenders require the expected rent to cover roughly 125–145% of the mortgage payment calculated at a stressed interest rate, so the property’s rental value sets the maximum loan. Different lenders use different stress rates and coverage ratios, which means the same property can support noticeably different loan sizes across the market — worth comparing before you commit to a purchase price.
Can a first-time buyer get a buy-to-let mortgage?
It’s possible but harder. Some lenders will consider first-time buyers for buy-to-let, with stricter criteria — bigger deposits, minimum income requirements and closer scrutiny — because you have no track record as a homeowner or landlord. You also won’t receive first-time-buyer stamp duty relief on a property you don’t live in. Our first-time buyer hub covers what FTB status does and doesn’t get you.
Can I live in my buy-to-let property?
No — living in a property mortgaged on a buy-to-let basis breaches the mortgage conditions, just as renting out a home on a residential mortgage does in reverse. If your circumstances change and you want to move into your rental, tell your lender: the proper route is switching the property onto a residential mortgage, which means a fresh affordability assessment based on your income.
Are buy-to-let mortgages interest-only or repayment?
Both exist, but interest-only is the norm for buy-to-let. It keeps monthly payments low, which maximises rental profit and helps pass the lender’s rent-coverage test; the loan itself is repaid at the end, usually by selling or remortgaging. Repayment suits landlords who want to own the property outright over time. It’s a strategy and tax question as much as a mortgage one — advice pays for itself here.
What is a let-to-buy mortgage?
Let-to-buy is buy-to-let in reverse: you convert your current home’s mortgage to a buy-to-let and rent it out, while taking a new residential mortgage on the home you’re moving into — two linked mortgages arranged as one transaction. It suits people who want to move without selling. Because it means owning two properties, the additional-property stamp duty surcharge applies to the new purchase.
- Prudential Regulation Authority (PRA) — underwriting standards for buy-to-let mortgage contracts (SS13/16)
- HM Revenue & Customs — Stamp Duty Land Tax on additional properties; Income Tax relief on residential property finance costs
- MoneyHelper — guidance on buy-to-let mortgages, let-to-buy and consent to let
Important information
nextmove is an introducer, not a lender or adviser. This article is for general information only and does not constitute financial or tax advice. We introduce you to FCA-regulated mortgage brokers who can advise on your individual circumstances, and we may receive a fee or commission for doing so. Most buy-to-let lending is not regulated by the Financial Conduct Authority.
Your property may be repossessed if you do not keep up repayments on your mortgage. Rates, criteria, stress tests, tax rules and stamp duty surcharges change over time — always confirm current details with a regulated adviser before proceeding.
Mortgages
Compare mortgage deals
Get matched with an FCA-regulated broker who knows the buy-to-let market. Free & independent.
Compare mortgage deals → Independent · No obligation