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Buy-to-let mortgages
According to recent buy-to-let landlord statistics, a typical UK landlord can expect an annual rental income of £8,256 per property they own. Getting the right buy-to-let mortgage rate is really important.
Use an expert comparison call with our broker partner, Mojo Mortgages, to compare deals from across the market in November 2024 to find the best one for you.
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Mojo Mortgages is an award-winning online mortgage broker. Their experts can compare deals to find the best buy-to-let mortgage for you
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.
The FCA does not regulate mortgages on commercial or investment buy-to-let properties.
What is a buy-to-let mortgage?
Buy-to-let mortgages, sometimes referred to as buy-to-rent mortgages, are used to purchase property that you plan to rent out to tenants for profit.
Some key differences with a standard residential mortgage are listed below.
Buy-to-let mortgage deposit
The deposit requirement is larger with 20-40% being the typical range, and most lenders asking for at least 25%, according to buy-to-let statistics.
Loan calculation
Borrowing is largely based on the rental income (or rental yield) possible from letting out the property. Some lenders may consider personal income alongside this.
Property use
You're unable to live in a property with a buy-to-let mortgage as the owner - even during the renovation period. A mortgage for rental property is just that, to be let to others.
Financial protection
Buy-to-let mortgages are not usually regulated by the Financial Conduct Authority (FCA), unless they're specific regulated products.
Buy-to-let mortgage rates
The best buy-to-let mortgage rates will be available to those with the lowest loan to value (LTV). Or, in other words, the largest deposit compared to the property value.
Another important factor is what's currently available on the market. Even the best BTL mortgage rates available are currently higher than those seen in the previous decade. So those remortgaging a buy-to-let property are likely to find that even the best rates are less competitive than they're used to.
Repayment buy-to-let mortgage rates
The table below shows fixed buy-to-let mortgage deals on a repayment basis, which mean you pay the interest plus a bit of the loan amount each month.
- 2 years
- Fixed rate
- Monthly repayment£ 831.17
- Loan to value60 %
- Initial interest rate3.39 %
- Variable rate8.49 %
- APRC8.1%
- Product fees£ 5,490
Representative example:Repayment mortgage of £168,000.00 over 25 years, representative APRC 8.1%. Repayments: 26 months of £831.17 at 3.39% (fixed), then 274 months of £1,310.53 at 8.49% (variable). Total amount payable £380,695.64. Early repayment charges apply until 31-Jan-2027. Arrangement, mortgage discharge, valuation and CHAPS fees total £5490.
- 2 years
- Fixed rate
- Monthly repayment£ 990.71
- Loan to value70 %
- Initial interest rate3.59 %
- Variable rate8.99 %
- APRC8.5%
- Product fees£ 6,330
Representative example:Repayment mortgage of £196,000.00 over 25 years, representative APRC 8.5%. Repayments: 26 months of £990.71 at 3.59% (fixed), then 274 months of £1,592.63 at 8.99% (variable). Total amount payable £462,139.08. Early repayment charges apply until 31-Jan-2027. Arrangement, mortgage discharge, valuation and CHAPS fees total £6330.
- 2 years
- Fixed rate
- Monthly repayment£ 1,280.94
- Loan to value80 %
- Initial interest rate4.79 %
- Variable rate8.44 %
- APRC8.3%
- Product fees£ 7,304
Representative example:Repayment mortgage of £224,000.00 over 25 years, representative APRC 8.3%. Repayments: 26 months of £1,280.94 at 4.79% (fixed), then 274 months of £1,756.90 at 8.44% (variable). Total amount payable £514,695.04. Early repayment charges apply until 31-Jan-2027. Arrangement, mortgage discharge, valuation and CHAPS fees total £7304. Legal fees £150.
The above fixed rates are provided by Mojo Mortgages and updated every 12 hours. THEY MAY NOT BE AVAILABLE WHEN YOU'RE READY TO SUBMIT AN APPLICATION.
Interest-only buy-to-let mortgage rates
This table below shows fixed buy-to-let mortgage deals on an interest-only basis, which means you only pay the interest each month, and the total loan is repaid at the end of the mortgage.
- 2 years
- Fixed rate
- Monthly repayment£ 474.60
- Loan to value60 %
- Initial interest rate3.39 %
- Variable rate8.49 %
- APRC8.1%
- Product fees£ 5,490
Representative example:Interest only mortgage of £168,000.00 over 25 years, representative APRC 8.1%. Repayments: 26 months of £474.60 at 3.39% (fixed), then 274 months of £1,188.60 at 8.49% (variable). Total amount payable £338,016.00. Early repayment charges apply until 31-Jan-2027. Arrangement, mortgage discharge, valuation and CHAPS fees total £5490.
- 2 years
- Fixed rate
- Monthly repayment£ 586.37
- Loan to value70 %
- Initial interest rate3.59 %
- Variable rate8.99 %
- APRC8.5%
- Product fees£ 6,330
Representative example:Interest only mortgage of £196,000.00 over 25 years, representative APRC 8.5%. Repayments: 26 months of £586.37 at 3.59% (fixed), then 274 months of £1,468.37 at 8.99% (variable). Total amount payable £417,579.00. Early repayment charges apply until 31-Jan-2027. Arrangement, mortgage discharge, valuation and CHAPS fees total £6330.
- 2 years
- Fixed rate
- Monthly repayment£ 894.13
- Loan to value80 %
- Initial interest rate4.79 %
- Variable rate8.44 %
- APRC8.3%
- Product fees£ 7,304
Representative example:Interest only mortgage of £224,000.00 over 25 years, representative APRC 8.3%. Repayments: 26 months of £894.13 at 4.79% (fixed), then 274 months of £1,575.47 at 8.44% (variable). Total amount payable £454,926.16. Early repayment charges apply until 31-Jan-2027. Arrangement, mortgage discharge, valuation and CHAPS fees total £7304. Legal fees £150.
The above fixed rates are provided by Mojo Mortgages and updated every 12 hours. THEY MAY NOT BE AVAILABLE WHEN YOU'RE READY TO SUBMIT AN APPLICATION.
Some landlords may prefer variable-rate mortgage options (such as a tracker mortgage) as these can be cheaper than a fixed-rate at the outset. Speaking to a whole-of-market mortgage broker can help you find the best buy-to-let mortgage rate for your circumstances.
“There has been more interest in variable rates from buy-to-let investors, who are looking at the difference in price compared to a fixed-rate deal. When they consider how much rates would have to increase to justify opting for a fixed-rate deal, some believe it will be more cost-effective to choose a variable-rate. However, this is dependent on the borrower’s attitude to risk – for many a fixed deal will give them the peace of mind they prefer.”
Ron Ogbue, Mortgage Expert at Mojo Mortgages
How can I get the best buy-to-let mortgage deal?
There's plenty of competition in the buy-to-let mortgage market, so be sure to have a thorough look at what's available to you before you commit to one. Our broker partners, Mojo mortgages, can help you do so in minutes.
To get the best buy-to-let mortgage deal you'll usually need:
A large deposit or amount of equity in other investment property
A promising property - lenders will be looking for a strong rental yield and prefer property in a high demand area where higher rents can be charger
Experience - you can often seem less risky if you have a history of owning successful buy-to-let property
How can I compare the best buy-to-let mortgage rates and deals?
Our partners at Mojo will provide guidance and recommendation on comparing rates and deals, but some top tips are:
Don't forget to factor in fees - fee free deals may seem cheaper, but rates are usually higher - but equally it won't always make sense to pay the fees for a slightly cheaper rate, depending on your longer term plans
Interest-only is not the only option. While many investors prefer to use this type of mortgage to keep costs low and expand their portfolio more quickly, it's possible to get a repayment buy-to-let mortgage. This can be a good starting point for some newer landlords
Be up front about your plans - not all buy-to-let lenders support all types of property or applicant. The cheapest buy-to-let deal won't be of any use if the lender doesn't allow HMO property and that's what you plan to buy
How does a buy-to-let mortgage work?
Buy-to-let mortgages are generally offered on an interest-only basis, so only the interest is repaid each month – the capital (amount borrowed) is repaid at the end of the mortgage term.
With a buy-to-let interest-only mortgage you’ll need a repayment plan in place to cover the final sum repayment. Most landlords sell the rental property, but you can also use savings or investments, depending on the preferences of the specific lender.
It's also possible to get a buy-to-let repayment mortgage, however, these are less commonly used. This is because an interest-only mortgage has a lower monthly cost - due to not repaying the capital - which allows landlords to keep their business costs lower.
Who is eligible for a buy-to-let mortgage?
Buy-to-let (BTL) mortgage criteria are more substantial than for a residential mortgage. While they vary between lenders, they usually include:
Minimum age – Usually 21-25.
Maximum age – This can be a little more flexible in the buy-to-let market but some lenders have a maximum age on application or by which you should have repaid the loan.
Home ownership status –Fewer lenders offer buy-to-let mortgages for first-time buyers, but they are available.
Minimum income – Not all lenders have one, but you may need to earn £25,000 or more to apply for some deals.
Deposit – Lenders usually require at least 25% of the purchase price, with portfolio landlords often being asked for larger deposits of around 40%.
Rental income – Borrowing is based on your rental yield and most lenders want the property to bring in at least 125% of the cost of the mortgage repayments. For portfolio landlords it can be up to 145%. Many will want an ARLA registered letting agent to confirm the rental potential.
Property type – Not all lenders accept applications for HMO (house of multiple occupancy) properties or mixed use rentals, so you're likely to need a more specialist lender if you plan to venture into anything other than single let property.
Credit history – As with other mortgages, the better your score, the greater choice of providers and, therefore, the better rates of interest available to you.
What type of buy-to-let mortgage do I need?
There are a few different products for buy-to-let, depending on the type of landlord you are:
Standard buy-to-let
Sometimes referred to as a vanilla buy-to-let, this is for existing landlords or those intending to get one mortgage – usually to let out single family homes on a secure tenancy basis.
This can either be as an individual, or as a limited company buy-to-let, which most businesses now operate through a specific special purpose vehicle (SPV). An SPV is a company that exists exclusively to manage the purchase, sale and letting of property for profit.
Family or regulated buy-to-let
A regulated buy-to-let mortgage is similar to a consumer buy-to-let, but it's used specifically to let property to close family members. It's often referred to as a family buy-to-let for this reason.
The purpose is not to turn a profit, and may be used when a spare or inherited property not being used by the owner is rented at market-rate to a close relative.
Consumer buy-to-let
A consumer buy-to-let mortgage is aimed at people who have become landlords as a matter of circumstance, rather than as an intentional career choice. They are regulated by the financial conduct authority (FCA), as they're not considered to be exclusively for commercial gain.
HMO mortgage
Although still used by professional landlords, not all lenders offer buy-to-let mortgages for HMO (house of multiple occupancy) properties. Sometimes a HMO mortgage is, therefore, referred to separately. It is a standard buy-to-let mortgage, however there are typically more regulations to be aware of.
How much will my buy-to-let mortgage cost?
You'll have the same costs to consider as you would with any other mortgage, however, some of them are higher, given the commercial nature of buy-to-let mortgages:
Mortgage fees – The usual costs of taking out a mortgage, such as the arrangement fee, valuation and legal fees apply. These are often higher for commercial properties.
Deposit – 25-40% of the property value.
Monthly repayment – The cost will vary based on the value of your property, how much you borrowed and your interest rate. Buy-to-let mortgage rates vary depending on whether you opt for a fixed or variable rate deal and the how risky the lender determines your borrowing (usually based on the LTV, but the type of property can also be a factor).
Final capital repayment – Most buy-to-let mortgages are interest-only, so it's important to consider how you'll repay the capital (amount borrowed) at the end of the term. Some landlords save an element of their rental income, whereas others may sell up or remortgage their buy-to-let property to pay back the debt.
Additional stamp duty – If you already own another property, including your own home and other rental properties, you'll need to pay a second home surcharge on any additional property. In England and Northern Ireland this is 3% on top of standard stamp duty, in Scotland it's 6% on top of LBTT and in Wales it's 4% on top of LTT .
If you purchase a buy-to-let property as a first-time buyer, you won't be eligible for the stamp duty relief that first-time buyers buying a residential property have.
Use our stamp duty calculator to find out how much you need to pay.
What additional fees do I need to pay on a buy-to-let property?
Aside from the above, there are other costs involved in becoming a landlord and managing a rental portfolio that you may wish to consider:
Letting agent fees – Letting agents usually charge 10 to 20% of the rental income as a fee to manage the property, depending on the level of property management they provide.
Maintenance costs – Aside from generally keeping the property in good condition, there are a number of regulations that you'll need to ensure you comply with in order to legally offer your property for let. For example, gas safety certification.
Income tax – This is payable on any rental income. This is charged at the rate applicable to your overall income level. If you buy through a limited company you'll be charged corporation tax instead, which is generally lower.
Capital gains tax - When you sell a rental property capital gains tax is payable on any profits made. It’s worth speaking to a tax specialist beforehand.
Building and landlords’ insurance - Tenants are only responsible for contents insurance, so, as a landlord you need to pay buildings insurance to cover any structural issues with your property portfolio. You may also want to look into landlords' insurance, to protect your income during tenant-free periods, or if tenants refuse to pay.
Buy-to-let mortgage comparison can help ensure that you maximise profit, especially in a turbulent market. An independent mortgage broker is an excellent resource for landlords looking to make the most of their portfolio.”Kellie Steed, Mortgage Content Writer
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Buy-to-let FAQs
What’s the difference between a buy-to-let and a residential mortgage?
A residential mortgage is a loan you get to buy a property that you’ll live in yourself. A buy-to-let mortgage is when you borrow money for a property you wish to rent out to tenants.
Should I get a repayment or interest-only buy-to-let mortgage?
Most landlords choose an interest-only mortgage and use the rental income to invest or save, paying back the entire mortgage later. If you take this approach, you must make sure you have a payment plan to cover the whole mortgage back when the mortgage term ends, as the lender will want to be confident you will be able to repay the loan.
If you choose a repayment mortgage, which is usually used to buy a residential home to live in, you’ll own the property outright at the end of the deal, but your monthly repayments will be higher.
What happens at the end of my interest-only buy-to-let mortgage?
You will need to repay the loan capital (the full amount you borrowed) at the end of the mortgage term, as you will have only paid the interest. Lenders will expect you to have a plan in place for this when you take out the mortgage, and it often involves selling the rental property on.
It’s important to consider that if the cost of your property drops, then the resale income may not necessarily cover what you have borrowed. A back up plan is always a good idea, no matter how you plan to repay the capital.
How many buy to let mortgages can I have?
There is no limit to the number of buy-to-let mortgages you can haven assuming you’re able to meet affordability for them all. That said, some lenders are reluctant to lend to portfolio landlords (those with more than 4 active buy-to-let mortgages) and it will get more difficult to borrow, the more properties you own.
There are specialist lenders that are able to accommodate portfolio landlords, however, and they are often happy to use existing investment properties in place of, or addition to the deposit, in order to secure your borrowing.
Can I change my residential mortgage to a buy-to-let mortgage?
Yes, you can. It’s possible to remortgage a residential property onto a buy-to-let mortgage, so long as the lender feels that both yourself and the property meet the criteria of buy-to-let lending.
It’s also possible to use a let-to-buy arrangement, which is where you take out two mortgages at the same time. This involves remortgaging your current home to a buy-to-let so that you can keep it as a rental property, whilst taking out a new mortgage to buy another home to live in.
Can I rent out a property on a residential mortgage?
No you can’t. Residential mortgages are intended for the purchase of a home you are going to live in yourself.
If you ignore the terms of your mortgage and let out a property that has a residential mortgage without speaking to your lender, you’ll be committing ‘mortgage fraud’. In these circumstances, it’s possible that your lender will demand that the mortgage is repaid immediately, or repossess the property if you’re unable to do so.
If you would like to try out being a buy-to-let landlord with your residential home before committing to it for the long term, it’s possible to look at getting a consent to let on your residential mortgage. This will give you a short term (usually 6-12 months) allowance to let out your home before you need to remortgage onto a buy-to-let product.
Do I need a buy to let mortgage if I rent my house through AirBnB?
It really depends on how you intend to offer your home on AirBnB, but you may not always need a buy-to-let mortgage. Some lenders will allow you to rent part of your home, perhaps a room or two, on an AirBnB basis with a standard residential mortgage. This is as long as you keep to their terms on the maximum number of days per year you can do this.
It’s important to speak to your lender first, as this may still be breaching the terms and conditions of your mortgage.
Whether you need a holiday let mortgage or a buy-to-let mortgage will depend on:
If you intend to offer your property as a whole
How long you intend to let it out to any one individual
How many maximum days you will offer your property to let throughout the year
How much can I borrow with a buy-to-let mortgage?
Loan size is usually based on the potential rental income from the property that you’re buying, rather than your personal income. But you'll still have an income assessment to ensure you'll be able to repay the loan when your property is vacant.
An ARLA registered letting agent should be able to advise you about local rental property prices in the area you’re looking to buy, or you could research this on property rental sites, such as Zoopla.
Can I get a buy-to-let mortgage as a first time buyer?
It can be more difficult, as some lenders prefer that you have experience of property ownership before you move into BTL mortgages. However, there are certainly lenders out there that will approve buy-to-let mortgages for first-time buyers.
Keep in mind that you won't benefit from the first-time buyer stamp duty relief if you're purchasing buy-to-let property.
Can I live in a buy-to-let house that I own?
No you can't, this would be breaking the terms of a BTL mortgage. Buy-to-let mortgages are only suitable for property that you intend to rent out as a landlord. Most mortgage terms will even restrict you living in them during the renovation period.
Is a buy-to-let mortgage cheaper than a residential mortgage?
No it isn't. In fact, as a BTL mortgage is a commercial product, buy-to-let interest rates are typically higher than that of an equivalent mortgage on a residential property.
The confusion may lie in the fact that most landlords use interest-only mortgages for buy-to-let purchases, which is cheaper to repay monthly. However, this means that at the end of the mortgage term you'd still owe the full loan, as you'll only have been repaying interest, not capital.
How can I compare the best buy-to-let mortgage rates?
The best way to compare BTL mortgage rates is going to be to cast your net as wide as possible. Each lender will have different criteria, so not every buy-to-let mortgage will necessarily be suitable for you.
Then of course, the more lenders you consider, the more chance you have of finding a competitive rate that does suit your needs. A broker with experience in this area, like our partners at Mojo mortgages, will be well-placed to help you.
Is a BTL mortgage worth it in 2024?
There's no doubt it's become more difficult for landlords to make a profit in recent years. Independent landlords in particular have not only been subject to higher buy-to-let interest rates, but also enjoy fewer tax benefits than portfolio landlord businesses.
That said, if you know where to invest, it's still perfectly possible to make a living from residential rental property. Speaking to a broker who specialises in buy-to-let mortgages can help. You could also check out our buy-to-let facts and statistics article for guidance.
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YOUR HOME/PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.
The FCA does not regulate mortgages on commercial or investment buy-to-let properties.
Uswitch makes introductions to Mojo Mortgages to provide mortgage solutions. Uswitch and Mojo Mortgages are part of the same group of companies. Uswitch Limited is authorised and regulated by the Financial Conduct Authority (FCA) under firm reference number 312850. You can check this on the Financial Services Register by visiting the FCA website. Uswitch Limited is registered in England and Wales (Company No 03612689) The Cooperage, 5 Copper Row, London SE1 2LH. Mojo Mortgages is a trading style of Life's Great Limited which is registered in England and Wales (06246376). Mojo are authorised and regulated by the Financial Conduct Authority and are on the Financial Services Register (478215) Mojo’s registered office is The Cooperage, 5 Copper Row, London, SE1 2LH. To contact Mojo by phone, please call 0333 123 0012.