A buy-to-let mortgage lets you borrow to buy a property you’ll rent out rather than live in. Most are interest-only, where each month you pay the interest, then repay the full loan at the end of the term, usually by selling the property using savings or remortgaging. How much you can borrow is based mainly on the rent the property can earn, rather than your salary, and you’ll typically need a larger deposit (around 20-25%) and pay higher interest than on a residential mortgage.
In this blog, we explain how a buy-to-let mortgage works, whether you’ll be eligible, how it’s repaid and what charges to expect.
Buy-to-let mortgages in summary
| Who are they for? | Landlords |
| Deposit amount? | Varies but can be at least 25% |
| How much can you borrow? | Borrowing is based on rental income. Rental income should typically cover 125%-145% of the monthly interest repayments. |
| Current housing status | Some lenders wish you to own your own home outright or with a mortgage. |
| Monthly payments | Interest-only payments each month are common (monthly payments cover accrued interest only), but repayment BTL mortgages also exist. |
| How is it repaid? | When the property is sold, through savings or by agreeing a new mortgage deal |
| Who can apply | Anyone who meets specific lender conditions. This may include lower and upper age limits, proof of income, a good credit score and more. |
What is a buy-to-let mortgage?
A buy-to-let mortgage is a form of loan that helps you buy a property you plan to rent out rather than live in. It works differently from a regular mortgage, as it is only for those renting out a home. Deposits tend to be higher, monthly repayments are often interest-only, and you’ll need to demonstrate your estimated rental income during the application to be assessed for eligibility.
What’s the difference between a residential mortgage and a buy-to-let mortgage?
With a residential mortgage, your lender looks at your earnings, deposit and your ability to repay the loan. A payment is made each month, with interest, until the balance is cleared, either by selling the house, through savings or with a new mortgage deal.
A buy-to-let mortgage, on the other hand, is often an interest-only loan, where each monthly payment covers the interest and the mortgage amount is repaid upon selling the house, using savings or through getting a new mortgage. Interest rates on buy-to-let mortgages also tend to be higher than on a residential mortgage because they are riskier for the lender.
For a residential mortgage, a lender considers your financial situation before offering you a deal; with a buy-to-let product, they are more concerned about potential rental income. That said, personal income is considered; it just doesn’t play quite the same role as it does in a residential mortgage application.
Who can apply for a buy-to-let mortgage?
Buy-to-let mortgages are available for anyone purchasing a property to rent out. Criteria vary per lender, but using NatWest as a guide, the following apply:
- Must be over 18 and a UK resident
- Your expected rental income will be at least 125% of your monthly interest repayments
- You have at least 25% of the property value as a deposit
- You have or will have fewer than 4 BTL properties, including the property you are purchasing or remortgaging, but excluding any residential mortgages
- The property is in the UK and is worth at least £50,000
- The property has the minimum EPC rating required for rentals
- You are borrowing at least £25,000 over a period of at least three years but no more than 35 years
- You are not borrowing more than £3.5 million in total from NatWest and its brands
For NatWest and many other lenders, HMO properties are ineligible for a BTL mortgage, as are bedsits, related persons’ tenancies, or holiday homes. You may also need to prove that earnings from employment exceed a specific figure; HSBC, for example, states you must earn at least £25,000 per year, excluding rental income, for a buy-to-let mortgage.
What are the types of buy-to-let mortgages?
There are commonly two types of buy-to-let mortgages. The interest-only route and the repayment mortgage. We explain how both work below:
Interest-only
This is perhaps the most common mortgage for a buy-to-let property. Interest-only means each monthly payment only covers the interest the loan accrues. The capital remains untouched. Once the term is over, you must repay the loan by selling the property, using your savings or taking out a new mortgage. Monthly payments are normally lower than a repayment mortgage, meaning you can reduce your monthly outgoings significantly.
Repayment mortgage
A repayment mortgage is similar to the mortgages other homeowners may use. Each month, you pay the interest and reduce the capital.
Are interest rates higher?
They can be, but it depends on what type of mortgage you choose. Some are fixed rate; others might be variable.
- Fixed rate: the interest rate stays the same for a fixed period (usually 2-5 years) before changing to the lender’s SVR.
- Variable: The rate changes during the duration of the loan. This means you may pay more some months and less in others.
Both have their merits. If you choose a fixed rate when rates are low, you benefit from that low rate for a fixed period. However, if they fall further, you’ll still be stuck paying the fixed rate you agreed on.
Variable rates mean your monthly payments can fluctuate. This could mean you make savings some months but pay much more at other times.
How much can I borrow for a buy-to-let mortgage?
How much you can borrow is usually based on two limits, and you’ll be offered whichever is the lower.
First, the property value: Most lenders cap lending at around 75%-80% LTV, so you’ll typically need a 20-25% deposit.
Second, the rent you can achieve: Lenders want it to cover roughly 125-145% of your monthly interest payment.
For example, if your monthly interest payment was £1,200, a lender may expect a rent of £1,500 (125%) or £1,740 (145%). This buffer allows you to build cash reserves that help you cover the mortgage during void periods when the property sits empty.
What deposit will I need for a buy-to-let mortgage?
Deposit values for a buy-to-let mortgage are generally higher than a residential mortgage, with at least 25% being common. This means that based on the average UK house price from HM Land Registry (July 2026), you would need almost £70,000 as a deposit. Criteria vary by lender, and in some cases you may be able to pay much less, but for particularly low deposits, you may need proof of an established property portfolio.
How do I apply for a buy-to-let mortgage?
Applying for a buy-to-let mortgage can be completed in a few simple steps, but before settling on a lender, check that you meet their eligibility criteria. Look for:
- Upper and lower age limits
- Minimum deposit values
- Rental income as a percentage of monthly repayments
- The minimum and maximum borrowing amounts
- Whether conditions for existing properties you own exist
The above isn’t an exhaustive list, so it can often be best to speak to a mortgage broker to learn about the types of products that could be available to you and what the lender expects.
Collect documents to support your application
When applying for a buy-to-let mortgage, the lender will expect a range of documents to support your application. These can vary by lender but will generally include:
- ID such as a passport or driving licence
- Utility bills (3 months’ worth is advisable)
- Proof of income
- Bank statements (3 months’ worth is advisable)
- Details of the property you wish to buy
- Up-to-date mortgage statement for your current home
- Rental income projections
Get an agreement in principle
With a property chosen, your documents collected, and the understanding that you meet the lender’s criteria, you’ll need an agreement in principle. This will give you an indication of what you MAY be allowed to borrow. It’s like a soft assessment rather than a guarantee, so it gives you an idea of what properties you may be able to make an offer on.
Make an offer on a property
With an agreement in principle, you can feel more confident in making an offer. Despite no guarantee of the mortgage, you have a rough idea of what you could borrow. Remember that your mortgage repayments will usually be interest-only and the rental income must cover at least 125% of each monthly interest payment. So, assess the rental market and get professional advice on which properties are popular with renters and what the going rates are. Making an offer on a property that might be hard to fill could mean you repay a mortgage with little rental income to support it. Make your offer, and if accepted, apply for your mortgage.
Complete a mortgage application
Now that an offer has been accepted, you can complete an official mortgage application. The lender will conduct more thorough checks at this point, including the deposit, your credit file and your rental projections. This means that even if a mortgage in principle was provided, you could still be rejected if you don’t pass the lender’s full assessment.
At this stage, they will look at what is called an ICR, or interest coverage ratio. This is where they determine how much of the monthly interest payments should be covered by rent (the 125%-145% we referenced earlier).
Property valuation
The lender will then value the property. This helps them confirm it is worth what you are paying for it and gives them an idea of the realistic rent you could achieve.
Receive a mortgage offer
If the lender is happy, they will offer you the mortgage and explain its terms. This includes interest rates, monthly payments, duration and any specific terms. Double-check it before signing, as some information may not match what you expected.
Conveyancing and completion
A solicitor or conveyancer will then handle the legal details such as contracts, searches and transfer of funds, enabling you to take ownership of the property and start letting it.
How do I repay a buy-to-let mortgage?
In many cases, repaying a buy-to-let mortgage differs from a standard residential mortgage, especially if you have an interest-only product. Each month, your payment covers interest, and the loan is cleared when you sell the property, use savings or secure a new mortgage deal.
If your loan isn’t interest-only, you’ll make monthly payments as you would with a standard mortgage where your repayments gradually reduce the outstanding loan amount.
Can I change my existing mortgage to buy-to-let?
Yes, it does happen. Residential mortgages can be changed to buy-to-let, but you’ll need to speak with your lender first. Simply letting someone rent your home when you are on a standard mortgage would be a breach of contract and could invalidate your mortgage.
If you want to rent out the property you currently live in or own on a residential mortgage, you have two common routes:
- Consent to let: This is where a lender gives you consent to let your property on your existing mortgage for a set period.
- Switching to a buy-to-let: Some lenders may request you switch to a BTL product; they may offer you one of their own products, or you may need to remortgage with another provider.
However, various factors will be considered. Lenders will want to see how long is left on your current deal and its terms. For example, if you are still benefiting from a special rate, you may face early repayment charges if you want to switch. Speak to your lender first; they can explain your existing deal and any potential switching opportunities.
Can I live in a buy-to-let property once I have bought it?
No, you cannot live in a buy-to-let property if a buy-to-let mortgage financed the purchase. This is considered a breach of contract and could mean the lender demands repayment of the loan.
Charges associated with a BTL mortgage
A buy-to-let property incurs a variety of costs in addition to the loan itself. These include:
- Arrangement fees
- Landlord insurance
- Letting-agent fees
- Maintenance costs
Whilst the arrangement fees may apply to the mortgage, the other costs are all relevant to a buy-to-let purchase.
In addition, you’ll need to consider income tax from your rental earnings, CGT when you sell the property and the Stamp Duty surcharge if you already own another property.
Thinking of letting out a property?
Whether you are buying your first rental or reviewing one you have already let, the right advice always makes a difference. At Cairds, as lettings agents in Epsom, we can give you a realistic rental valuation and talk you through what your property could achieve in the current market. Contact us today to find out more from one of our experts.
This article does not constitute financial advice. Failing to maintain mortgage payments may result in the loss of your home. Always seek financial advice before committing to any mortgage product.