Buy-To-let Mortgage Deals & Rates
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A buy-to-let mortgage is a financial product designed for individuals looking to purchase properties as an investment, specifically to rent them out rather than living in them. This type of mortgage works differently from a traditional residential mortgage, and it’s crucial to understand the specifics before diving into the property rental market.
Written by:
Alison Gibson
Ascot Mortgage Expert
Last Updated:
27.05.2025
Written by:
Alison Gibson
Ascot Mortgage Expert
Last Updated:
27.05.2025
Investing in property is usually done using a buy-to-let (BTL) mortgage, it has become a popular way to generate rental income as a secondary income and build longer term wealth. Whether you’re a seasoned landlord or considering your first BTL investment, understanding the intricacies of BTL mortgages is crucial. The following information provides the detail on the fundamentals, eligibility criteria, costs, and considerations associated with buy-to-let and let to buy mortgages in the UK.
Based on a mortgage of £300,000 at 75% LTV and 25 years Today’s best buy mortgages
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What is a Buy-to-Let mortgage?
A buy-to-let mortgage is used by people who are looking to purchase a property to rent out, rather than getting a standard mortgage for a property they will live in themselves. There are several differences between a BTL mortgage and a residential mortgage:
- Interest-only payments: Most people will opt to take their BTL mortgage on an interest-only basis, this means only the interest is paid each month leaving the capital to be repaid at the end of the mortgage. Lenders are keen to allow this on BTL, this helps investors to maximise the monthly rental income and realise the growth in the property’s value over time.
- Rental income assessment: Affordability is assessed using the rental income rather than personal income. Lenders will use the potential rental income for the property to ensure it covers the monthly mortgage payment. The lender will use their own calculation to assess if this fits their affordability calculation; typically lenders require the rent to be at least 125% of the monthly interest payment.
- Higher deposit: BTL mortgages often require you to put a larger deposit down, this is usually around 25% of the property’s value but there are some lenders with products that will allow a 20% deposit.
Eligibility criteria for Buy-to-Let mortgages
Each lender will have their own qualifying criteria for a BTL mortgage, this will vary from lender to lender and based on your individual circumstances typically the following will be basic requirements:
- Age: A minimum age of 18 or 21 applies in most cases for lenders, understanding which lenders is where a broker like Ascot Mortgages can help find the right lender for your services. There are upper age limits to consider, as some lenders have a maximum age of up to or between 70-80 years at the end of the mortgage term.
- Income: Some lenders also require a minimum income, commonly £25,000, is used as the minimum requirement. It provides the lender some comfort that if there was a small rental void that the payments could be made during this period.
- Credit history: Most lenders will expect you to have a good credit history to evidence that you are a suitable borrower. There are lenders which typically are only available using a mortgage broker firm like Ascot Mortgages that can find you a mortgage if there were potential issues with your credit history. You might also want to consider trying to build your credit score back up to give you the best chance of success.
- Property ownership: Several lenders will require you to already be a property owner whether that be your own residential or another BTL property. There are lenders that will be ok with you being a first-time buyer, first time landlord.
How much can you borrow with a Buy-to-Let mortgage?
The amount you can borrow is primarily determined by the expected rental income for the property:
- Rental coverage ratio: Lenders will initially want to know the expected rent for the property and want this to be more than the mortgage payment. To provide the lender with more security they will often require the rental income to be from 125% to 145% of the mortgage interest payments.
- Stress testing: In addition to the rental coverage ratio lenders use a ‘stress rate’ to the calculation, this uses a higher rate of interest that you will get for the mortgage and ensures that should interest rates rise during the time you have the mortgage the rental income will still cover the increased mortgage payment.
- Personal income: There are some lenders they will consider using some of your personal income to cover any potential shortfall using the expected rental income. Each lender will have a slightly different approach to what amount and what type of income they can use in this scenario.
Use our free BTL Mortgage Calculator to estimate how much you could afford or speak to one of our Warrington mortgage specialists for personalised advice.
Mortgage types for a Buy-to-Let mortgage
There are 2 types of mortgage to choose from, either interest only or a repayment mortgage.
- Interest-only mortgage: the most common when it comes to a BTL mortgage, you only pay the interest meaning the monthly payments are lower. You will have to pay the capital at the end of the mortgage term. Most people will look to sell the property at some point so repay the mortgage at this time and hope the property has increased in value but the property could be worth less therefore you will need to consider other options and have a plan in place, just in case.
- Repayment mortgage: with this type of mortgage the monthly payment consists of the interest and some of the capital each month meaning at the end of the mortgage term providing all monthly payments have been made on time you will own the property.
How much deposit do you need for a Buy-to-Let mortgage?
The deposit required for a BTL mortgage is generally higher that they are for your standard residential mortgage:
- Standard deposit: Lenders usual requirement for a deposit is a minimum 25%.
- Lower deposits: There are lenders offering products with only a 20% deposit requirement, but these usually come with a higher rate, higher fees and potentially stricter criteria.
- Higher deposits for better rates: If you can put more of a deposit down then providing a larger deposit can result in a lower rate and help in scenarios where the rental coverage ratio isn’t quite working.
Factors that affect Buy-to-Let mortgage rates
There are several elements that play a role in influencing the interest rates offered by lenders on BTL mortgages:
- Loan to value: The lower the LTV means the lower the rate offered
- Fixed vs. variable rates: There will be fixed rates and variable rates on offer, the fixed rates offer stability over the fixed term, while the variable rates can go up or down with market conditions.
- Lender policies: Each lender has their own specific criteria and policy, things like the type of property or the type of tenancy can have an impact on the rate the lenders offer, as the riskier the criteria the higher the rate is likely to be.
Additional costs associated with Buy-to-Let mortgages
When purchasing any property there are additional fees to consider, below is a breakdown of some fees that you might need to consider specially for a BTL property:
- Arrangement fees: Lenders can charge a fee for setting up the mortgage, this is often called an arrangement fee and will either be a percentage of the loan or a flat fee.
- Valuation fees: This fee is payable as the lender needs to assess the property is suitable security to lend on and meets their lending criteria. Some lenders can offer free valuations but this is usually only for remortgages and may also depend on the LTV.
- Legal fees: The cost of the conveyancing and legal work required to complete the property purchase or remortgage.
- Stamp Duty tax: Stamp Duty is charged on all property purchases but there is an additional charge for this tax when you purchase a BTL property, you will be required to pay an additional 3%.
- Maintenance and repairs: The property must be kept in a good state of repair so there may be ongoing costs to keep the property in rentable condition.
- Insurance: You should consider landlord insurance to cover property and liability risks associated with owning a BTL property.
- Letting agents: You may opt to use a letting agent to take care of the putting tenants in and dealing with queries from the tenants, a fee is charged for this service.
- Capital Gains Tax: If you decide to sell the property you will usually have to pay Capital Gains Tax on any profit you make from the sale above your tax free allowance.
- Income Tax on the rental income: Income earned from the BTL property will be liable for income tax, there is a Property Allowance and there are options to offset some allowable expenses, it is best to speak to a tax expert.
There is lots to consider so for tailored advice, we recommend speaking to one of our brokers to get a personalised mortgage quote.
What is a let to buy mortgage?
A let to buy mortgage simply means you wish to let your existing residential property to allow you to purchase a new residential home to live in. It essentially means you convert your current residential mortgage to a BTL mortgage and take a new residential mortgage for your next home.
Key considerations:
- Equity: Most people will look to raise the deposit for this new home using the equity that has built up in their current home, therefore when changing the mortgage to a BTL mortgage they will look to release some of the equity.
- Affordability: Changing to a BTL will mean the lender will assess affordability using the rental income and for the new residential mortgage affordability will be assessed using personal income.
- Consent to Let: If you are in a position where you don’t need to change the mortgage to release equity for the deposit you can retain your existing mortgage but will need to obtain permission from your lender to do this, this is called Consent to Let.
Tips for choosing the right Buy-to-Let mortgage
- Compare rates: Evaluate the market and see what types of rates are available and what suit your circumstances best.
- Consider fees: Review the market and find the most competitive deal, the best rate may not be the best deal as high fees are common in the BTL market.
- Assess flexibility: Look at the features that lenders offer; overpayments either unlimited or to a fixed amount.
- Professional advice: Speak to a mortgage adviser, they can navigate the market and potentially look at products that might not be available directly to you. The BTL market can be complex so finding the most suitable product can be tricky.
What is a Let to Buy Mortgage?
If you’re thinking of moving but don’t want to sell your current home, a let to buy mortgage could be a good option. It will allow you to rent your current property out and use the equity tied up in it to help buy your next house.
Let to buy mortgages tend to be used when someone is moving in with their partner, relocating with a new job, or wanting to keep their current home as a long-term investment.
How does Let to Buy work?
Let to buy involves two mortgages happening at the same time:
- A remortgage is done on your current home and changed into a Buy to Let deal, so you can legally rent it out.
- You then use the equity that you release from that remortgage as the deposit for a new home you plan to live in.
The idea is to keep your old home, start earning rental income from it, without having to wait to sell it and still be able to move forward with your next property purchase.
Even though it can sound a little complicated, with the right support and advice, it’s often more straightforward than people expect it to be.
Why choose a Let to Buy mortgage?
Some of the reasons people go down the let to buy route:
- You’re struggling to sell your home in time and don’t want it impacting your ability to move to your desired property.
- You want to keep the property as an investment and make additional income from it.
- You’re moving in with someone but don’t want to give up your existing home just yet and keep this as a safety net.
- You want to plan ahead financially and want rental income to help with your long-term plan.
Let to buy mortgages gives you more flexibility and can be a useful stepping stone if you’re not quite ready to sell.
Pros and cons of Let to Buy
Pros
- You keep your existing property as a potential long-term asset/investment
- You can avoid rushing into a sale in a slower market
- You can start earning income from renting the property straight away
- You free up funds to help with your next property purchase
Cons
- You’ll be taking on the role of a landlord, which comes with responsibilities
- There could be periods where the property is empty and not earning rent
- Stamp Duty is higher on second properties (though you might be able to claim a refund if you sell your old home within 3 years)
- Let to buy mortgage rates are can sometimes be higher than your standard residential interest rates
Let to Buy mortgage rates – What to expect
Let to buy mortgage rates can vary depending on how your mortgage loan is valued, the rental income, and your personal financial circumstances. Generally, they can be slightly higher than rates for standard residential mortgages.
Rates will also depend on:
- How much you want to borrow
- Your credit history
- The expected rental income
- How much equity you’re leaving in the original property
We can look at the full picture and assist you to find a deal that fits.
Is Let to Buy the same as Buy to Let?
Not quite. A Buy to Let is where you buy a property with the intention of renting it out from day one.
With a Let to Buy mortgage, you already own the property – you’re just changing the use of it. It becomes a rental property while you move into a new home.
So, you’re effectively turning your old home into an investment property and buying your next one to live in.
Want to talk it through?
If you’re thinking about letting out your current home and buying a new one, we can help you work out whether a let to buy mortgage is the right option for you.
We’ll help explain how it works, help you compare the let to buy mortgage rates, and guide you through the process from start to finish.
Get in touch today to chat with one of our specialists today for a free, no-obligation mortgage quote.
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Alison Gibson
Ascot Mortgage Expert
Navigating the Buy to Let Landscape
What Our Expert Says...
Buy to Let has long been a cornerstone of the UK’s property investment domain. It offers a dual reward of rental income and potential capital appreciation. However, it’s not without its complexities. Successful Buy to Let investments hinge on location choice, understanding market trends, and managing ongoing landlord responsibilities. Additionally, one must be astute about tax implications and regulatory changes. My advice? Keep yourself educated, seek professional advice, and always maintain a long-term perspective.
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FAQ
Yes, it is possible but the options are limited as lenders want you to have experience of owning a property before purchasing a BTL.
Yes, there is income tax, stamp duty and capital gains to consider throughout the time you own the property. It is best to speak with a tax expert.
No, the lender grants the mortgage on specific BTL terms therefore if you moved into the property you would be in breach of these terms.
You can have unlimited BTL’s although a lender may restrict the number of mortgages you can have with them or put a limit on the total number they will allow you to have in total.
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Ascot Mortgages authorised and regulated by the Financial Conduct Authority and can be found on the FCA register (www.fca.org.uk) under reference 776062. The FCA do not regulate some forms of mortgages. The guidance and advice contained in this website is subject to UK regulatory regime and is therefore restricted to consumers based in the UK. There may be a fee for mortgage advice. The precise amount will depend upon your circumstances but we estimate it will be £599 per mortgage account. Ascot Mortgages Ltd give you the option to pay a non-refundable fee of £1299 payable with the application. If this option is taken, Ascot Mortgages Ltd will refund any procuration fee received by the lender.
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