A buy-to-let mortgage guide

Invest in your property with a buy to let mortgage.

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Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.
If you are looking to become a landlord and rent out your property for profit but can’t afford to buy the property outright, a buy to let mortgage could help you out. We know mortgages can be complicated so we have come up with this informative guide to make the process as easy for you as possible.

How do buy to let mortgages work?

Buy to let mortgages are a specific type of mortgage for those who wish to buy and rent out a property but require financial assistance.

They work in a similar way to your standard mortgage accept the type of loan you may be eligible for is based on the how much rent the property can generate rather than simply looking at your own personal financial circumstances. Most lenders will still require you to have a minimum annual income, the amount of which is dependent on the lender.

It is worth noting that buy to let mortgages usually require a higher minimum deposit, typically around 20% and the interest rates on buy to let mortgages are typically higher than on conventional residential mortgages.

How to compare buy to let mortgages?

It is important to take your time and research different mortgage lenders and different mortgage deals to make sure you get the best deal for your circumstances. Here are some common ways to compare buy to let mortgages.

  • Eligibility. You will want to make sure that your loan meets the criteria for your investment strategy. For example, not every mortgage is available for commercial property and some loans may have limits on square meterage or not be available for certain property types.
  • Investor benefits. If you’re investing you might want to ensure your home loan has features which can maximise tax benefits or maximise cash flow. For example, an interest-only or offset feature.
  • Rates. You’ll also want to compare the interest rates available with your buy to let mortgage. Rates have a huge influence on the size of your repayments, so be sure to compare loans and find one with the right rates, in addition to features and minimal fees. Also it is worth comparing fixed and variable rates to find one which suits your investment strategy.
  • Fees. Compare not only application, valuation and legal fees but also ongoing fees for features such as offset accounts and redraw facilities, and also monthly fees.
  • Other features. This last point of comparison will largely depend on how you plan to use your loan. If you plan to put extra funds towards your home loan, ensure that your mortgage deal won’t penalise you. If you want to get access to these extra funds, it might be worth looking for a loan with a redraw facility.

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Weighing up the benefits and the risks

As with any investment, choosing to invest in property carries both benefits and risks. It’s important you weigh up the pros and cons of property investment before you decide if the strategy is right for you.

Property investing benefits

  • Rental income. An investment property can increase your cash flow by providing you with a second income source through rental income. A well-located investment property could provide 3-5.5% rental yield. When it comes to selling your property, you may be able to benefit from making a capital gain.
  • Flexibility. An investment property is one of few investments that is physically tangible. If your situation changes and you no longer wish to use your property as an income-producing asset, you can always move into it. However, be mindful that there may be tax implications if you choose to do this.
  • Tax and depreciation benefits. If you have a knowledgeable accountant and quantity surveyor, there’s plenty of room to take advantage of certain tax advantages of property investment, including negative gearing.
  • Control. Unlike other asset classes such as shares, many aspects of your property investment can be controlled. You can carry out value-adding activities on your property such as renovations, you can remortgage if you find a better rate, turn your property into a boarding house – the choice is yours, provided you comply with relevant laws and council guidelines.

Property investing risks

  • Costs. Buying a property can be costly, depending on the size and location. There are also many other upfront costs you may have to pay, including stamp duty, building inspections, conveyancing and legal charges, and it is worth noting that buy to let mortgages usually have more or higher arrangement fees than conventional residential mortgages. As the owner of the property, you’ll also be responsible for covering ongoing costs such as repairs and maintenance, property management fees, council taxes, etc.
  • Interest rate rises. Because many of us use mortgages to finance investment properties, interest rates can play a major part in increasing or reducing costs. If interest rates go up, you’ll have a higher repayment.
  • Selling a property takes time. Unlike shares and other investments, selling property can take a while and usually requires assistance from professionals such as a real estate agents, accountants and conveyancers. This means if you think you might need your investment cash on short notice, then property investment might not be for you. Also unlike shares, you can’t sell portions of your investment property off if you need the cash quickly.
  • Untenanted periods. If you rely on rental income to help pay off your property investment loan, you face the risk of untenanted periods which means that you may suffer financially. This is why it’s important to take precautionary measures such as ensuring you have a cash buffer.

10 common mistakes to avoid when buying to let

1. Buying the wrong property

When you look at investment properties you need to view them as a landlord, not an owner. You need to consider whether it’s attractive for people looking to rent rather than buy. Your personal tastes and desires shouldn’t come into it.

A good rental property will be in a good location with useful travel links. It will have spacious rooms and should be relevant to the target market of the local area. Are you targeting families or single professionals?

2. Not doing your homework

You need to look at the local rental market and find out who’s renting property, how much they’re paying for it and whether there’s a big enough demand. What is the demographic of people in the area? Is it an area full of students and young professionals who might prefer a large apartment, or is it the perfect place for families to settle down?

Without looking into the facts and figures you could buy a property which is of no interest to the local pool of would-be tenants.

3. Underestimating your costs

It is very easy (and tempting) to underestimate the amount of time and money it will take to get your property fit for rental. This mistake leads to new investors running into serious cash flow problems. Get quotes for the work you need to do and multiply that figure by at least two. That way you have a buffer in case the work proves more expensive.

4. Having no spare funds

It’s vital to have an “emergency fund” set aside for each of your investment properties. If an expensive repair is needed and you don’t have the cash, you could end up getting the job done cheaply. This just leads to problems down the line and more worryingly angry tenants.

One of the best ways to build your emergency fund is to take some of your rental profit each month and get it paid into a completely separate account. Keep these funds away from your normal bank accounts and you won’t be tempted to dip into it.

5. Trying to do the work yourself

Running investment properties requires more work than you may think and some new investors try to save money by doing everything themselves. Big mistake! It’s almost impossible to be your own repairman, property manager and accountant and stretching yourself too thin leads to costly errors.

Build yourself a team of reliable experts to outsource the work to, so you can spend your time more productively. In many cases professionals know how to save you money, so try to think of them as an investment.

6. Rushing into decisions

Don’t be a bull in a china shop. Entering the property investment market is very exciting and can be very lucrative but jumping into things without thinking about them can cost you a fortune. Take the time to research potential properties, know the local market and be sure to interview a number of partner professionals before choosing who you want to work with.

Remember the old saying “more haste less speed?” Well in property investment the saying is “more haste less profit!”

7. Investing from a distance

Don’t be tempted to buy property far away unless you’re prepared to travel to the site yourself. Setting up an investment property without seeing it with your own eyes is a recipe for disaster. If you do decide to buy out of the way make sure you’ve got a reliable estate agent to manage the property for you. Meeting them in person is also a must, regardless of where they’re based.

8. Paying over the odds

Don’t be fooled into thinking you can’t make a low offer on an investment property. Remember your portfolio is a business and the idea is to make a profit. You don’t know the position of the seller and they may be after a quick sale whatever the price. The worst that can happen is they say no and you try to negotiate.

9. Ignoring your competition

Don’t overlook what other landlords in your area are doing. Find out how much they’re charging for rent, how long it took them to find tenants and how are their properties presented. Also make a point to look at the adverts for properties in your area. What do they say and which papers are they in? You can get some very useful tips from studying the competition.

10. Not getting insurance

Going without a complete landlord insurance is a huge mistake. It covers you should something major go wrong with the property. A good policy will also cover you for lost rental income and will pay to rehome your tenants if your property is damaged and needs repairs.

As with any insurance cover make sure you read the fine print so you understand what’s protected and what’s not. The less you pay for cover the less protection you normally have.

Tips to be approved for a buy-to-let mortgage

To be approved for a buy-to-let mortgage, it’s likely you’ll already need to own property.

You’ll have to save a deposit worth at least 20% of the property’s value, and have the funds to be able to cope with a lengthy void period.

Even if you meet this minimum lending criteria, there’s no guarantee you’ll be approved for a mortgage.

Here are some tips to boost your chances of approval.

Choose a suitable property

Lenders are reluctant to secure mortgages against certain types of properties, including new-builds, high-rise flats, flats above commercial properties or unusually-structured buildings.

These are considered harder to sell in the case of repossession, so it’s tougher to be approved for mortgages on these buildings, especially if your income and credit score aren’t in an ideal state.

You can improve your chances of being approved for a mortgage by avoiding these properties.

The less you borrow, the better

The less you borrow from a mortgage lender, the lower your monthly repayments and the easier it is to pass a lender’s affordability checks.

You can lower the amount you borrow either by applying for cheaper property or saving up a bigger deposit.

This could make you eligible for a lower interest rate too.

Reduce your outgoings

In order to approve your mortgage, your lender will want to see proof that the property’s rental income can make a specific amount of profit, usually at least 125%.

It will also check your recent bank statements to ensure you can comfortably afford the costs associated with your buy-to-let mortgage, such as repairs, maintenance, home insurance, void periods, etc.

Lenders will check your recent bank statements to ensure you can comfortably afford the costs associated with your buy-to-let mortgage. Pay off as much of your existing debts as possible and try haggling over the costs of your utility bills. You can improve your perceived ability to cover these costs by reducing your outgoings now.

Improve your credit score

Lenders will use your credit score as an indicator of how reliable you are at managing debt. This will play a major role in their decision to lend to you or not.

Take steps to improve your credit score by making timely repayments on all your bills by direct debit. Take care not to go overdrawn in any of your current accounts or credit cards. If you don’t have a credit card open, it’s worth applying for one and making timely payments on this each month.

Before you apply for a mortgage, check that your credit report is free from errors. It’s possible there are mistakes that could harm your application. You can check for them and make amendments by contacting any of the UK’s three major credit reference agencies: Equifax, Experian or TransUnion (Callcredit).

Prepare the correct documents

When you’re applying for a buy-to-let mortgage, the lender will want to see a number of documents including:

  • Proof of identity
  • Proof of address
  • Proof of income
  • Recent bank statements
  • Information regarding your other properties

It’s particularly important to provide as much financial information as possible when you’re self-employed, or earning an income heavily based on commission or bonuses.

Lenders regard this income as less stable, so it’s up to you to provide as much proof as possible of its stability. You’ll typically be expected to provide at least three years of accounts if you’re self-employed, although some lenders will accept less.

Ensure your correct name and address are registered on the electoral roll

This is a quick hack that can improve your odds of having a mortgage application approved.

Don’t make too many mortgage applications

Applying for several buy-to-let mortgages – and being rejected every time – will harm your chances of being approved in the future.

Every time you make an application, the lender will credit check you, and this causes a slight knock to your credit score. Too many of these can damage your score to the point that lenders will be spooked away from approving your application.

It’s better to learn which lenders are most likely to accept your application, find the best deal, and apply for this when you’re in a great position to be approved.

A professional mortgage adviser will help you to do this. These individuals have specialist knowledge of the buy-to-let mortgage market and will be able to show you the best deals that you’re likely to be approved for. This can remove so much hassle from the mortgage application process, leaving you free to focus on other areas of your buy-to-let empire.

Should I use a buy-to-let mortgage broker

A buy-to-let mortgage is likely to involve tens of thousands of pounds being borrowed. The difference between the best mortgage deal and a run-of-the-mill one could cost you a fortune. That’s why it’s recommended to seek expert help when choosing a mortgage.

Buy-to-let mortgage brokers are individuals with specialist knowledge of this market, including the eligibility criteria of individual lenders. This allows them to recommend the lenders most likely to approve your application, saving you time, hassle and damaged credit.

Some buy-to-let mortgage deals are only available through brokers, while it’s possible a broker could negotiate a better deal on your behalf.

What’s more, they’ll be able to talk you through any issues you don’t understand.

Pros and cons of a mortgage broker


  • Find the best possible mortgage deal for your circumstances.
  • Save time, allowing you to complete your purchase quicker.
  • Access expert knowledge of lenders’ eligibility criteria, so you can apply to lenders most likely to approve you.
  • Access the deals that are exclusively available through brokers.
  • Some brokers have been known to haggle for a better mortgage rate on their customer’s behalf.


  • With many brokers, you’ll pay a one-off fee.
  • You’ll have to communicate with your mortgage broker during office hours.
  • Not all brokers search the whole market.
  • Not all brokers have great customer reviews. You’ll have to shop around for a quality professional.

What is the minimum deposit?

Buy-to-let mortgages have a higher minimum deposit than residential mortgages. Typically, you’ll need a deposit worth 25% of the property’s value. However, it’s common for lenders to ask for anything between 20% and 40%.

Lenders ask for a larger deposit because there is a bigger perceived risk with a buy-to-let mortgage. After all, you’re relying on a third party to cover the mortgage with their rental payments and to keep the property well-maintained.

As with any other type of mortgage, the bigger your deposit, the easier you’ll be able to get approval for your mortgage.

Can you live in a property with a buy-to-let mortgage?

Most buy-to-let mortgages will stipulate that the owner can’t live in the property under any circumstances.

The reason is that buy-to-let mortgages aren’t regulated by the Financial Conduct Authority, and lenders could face punishment if they arrange an unregulated mortgage for someone’s home.

If you do live in your buy-to-let property, even for one day, you could invalidate the terms of your mortgage and be asked to repay the loan in full.

Are buy-to-let mortgages more expensive than other types?

You can expect to pay higher interest rates and larger one-off fees when arranging a buy-to-let mortgage. This is partly to do with the higher risk for the lender, but also because high demand for buy-to-let properties allows the cost of these mortgages to inflate.

Is it possible to get a buy-to-let mortgage without an income?

Some lenders will approve buy-to-let mortgages for applicants with no income. However, in this situation, more weight will be placed on their history of successfully managing buy-to-let properties. If you have no income and have never owned a buy-to-let property, it could be tricky to get approved for a mortgage.

Are buy-to-let mortgages required to rent out your house?

If you rent out a property with a residential mortgage, you’ll probably be invalidating its terms. However, in certain circumstances, you may be able to seek a “consent to let” on a property you’ve already bought to live in.

To be granted this, you’ll usually need to have held the mortgage for a minimum amount of time (usually six months). The lender may need to be convinced that letting the property wasn’t your original intention. You may have to pay a fee or a higher interest rate to be granted a “consent to let”, but it’ll usually be cheaper and less hassle than remortgaging.

Lenders tend to be more lenient if you’re renting out a room in a property you’re still living in. However, you’ll still have to inform them of this.

Your home and contents insurance providers will also need to hear about any changes in the occupiers of your property.

Can you rent to a family member using a buy-to-let mortgage?

This is possible, although some lenders won’t allow it. Once again, if you’re looking to do this, it’s best to use a mortgage adviser to find a suitable lender for your circumstances.

Can first-time buyers get buy-to-let mortgages?

Most lenders require you to be a homeowner in order to consider your buy-to-let mortgage application. However, some will consider first-time buyers too.

If you’re in this situation, it’s best to work with a professional mortgage adviser, who will have the expert knowledge to recommend the best deals that’ll actually be available to you.

Switching from a residential to a buy-to-let mortgage

It is possible to switch from a residential to a buy-to-let mortgage but you will need to consider which type of deal best meets your needs. You may be able to do this with your current lender. However, it could be necessary to remortgage with a different lender on a buy-to-let basis. Learn more about this process.

How to switch your mortgage from buy-to-let to residential

If you want to live in your buy-to-let property, you’ll first have to switch to a residential mortgage. You’ll often be able to remain with your existing mortgage lender, although it’ll sometimes be more beneficial to remortgage with a new provider. Our guide explains more.

Remortgaging a buy-to-let property

You’ll often save a lot of money by remortgaging as your mortgage’s introductory bonus rate is expiring. The remortgaging process is extremely similar to switching residential mortgages. Check out the best remortgaging rates here.

Renting to a family member

You can rent a property to a family member, although there are different rules that you’ll need to be aware of. The lending criteria tends to be stricter too, as mortgage providers regard this type of lending as more risky. Learn more with our guide.

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