What is a buy-to-let mortgage?

Whether you’re a seasoned property expert or a first-time landlord, your mortgage will be an integral part of the overall success of your investment. You’ll need a specialist buy-to-let mortgage, and it’s important to understand how they work.

Buy-to-let mortgages operate a little differently than normal residential mortgages. For one thing, they tend to be interest-only mortgages, rather than more common repayment mortgages. Also, lenders focus on the rental income the property can generate when deciding how much you can borrow.

Although it can seem daunting if you are new to the world of buy-to-let, help is at hand. We hope the information on this page will answer most of your questions. And most of all, make sure you compare mortgages from different lenders to be sure of getting the best deal to maximise your investment.

Are you eligible for a buy-to-let mortgage?

Before you take your first steps to expanding your property portfolio, there are a few things lenders will look at to decide if you qualify for a buy-to-let deal:

  • Age: Lenders set a maximum age limit, typically around 75 years, though some may have lower age restrictions.

  • Property ownership: Some lenders require you to already own a home, either outright or with a mortgage.

  • Credit history: Whilst there isn’t a specific credit score required for a mortgage, having a higher score may improve your chances of being approved. Checking yours to see if any improvements can be made could give you a boost!

  • Minimum income: Some lenders require a minimum income in addition to rental income, typically around £25,000 a year.

  • Deposit: Typically, you’ll need at least 25% deposit, meaning a loan-to-value ratio of 75%.

  • Rental income: Your rental income should typically cover at least 125% of your mortgage repayments. So, if your mortgage is £800 a month, the rent needs to be £1,000 or more.

Of course, every lender has its own specific requirements, so it’s good to shop around and compare options to find the best fit for your needs before making a decision.

One more thing… your home could be repossessed if you don’t keep up with repayments, so make sure you’re comfortable with what you can afford before taking the plunge.

What are my buy-to-let mortgage options?

If you’re thinking about taking the plunge and becoming a landlord, you have two main options initially: interest-only and repayment.

Interest-only mortgage

With an interest-only mortgage (the most popular choice for buy-to-let) you pay only the interest each month, keeping your monthly payments lower. However, you’ll need a plan to repay the full loan at the end of the term, typically by selling the property. If house prices fall, you could end up owing more than the property is worth, so it’s crucial to have a backup plan.

Repayment mortgage

A repayment mortgage, on the other hand, reduces both the loan and interest over time, meaning you’ll fully own the property by the end of the term. While monthly payments are higher, you won’t face a lump sum repayment later.

You’ll also need to choose between a fixed or tracker interest rate. A fixed-rate mortgage gives you certainty over your payments for a set period, protecting you from interest rate hikes. A tracker mortgage can fluctuate depending on market conditions, which may lead to lower or higher payments over time.

How much will my buy-to-let mortgage cost?

The monthly cost of a buy-to-let mortgage can vary widely depending on several factors. Your deposit size, the loan term, the type of mortgage, and the interest rates and fees all play a role in determining how much you’ll pay overall. While there’s no set price for a buy-to-let mortgage, understanding these key factors can help you estimate your costs.

Here are the main factors that lenders will consider:

Deposit size

The bigger your deposit, the less you’ll need to borrow. Having a lower loan-to-value (LTV) can mean lower interest rates and overall costs.

Loan term

A longer repayment mortgage term spreads repayments out, making monthly costs lower, but results in paying more interest over time.

Type of mortgage

Interest-only mortgages mean lower monthly payments but require you to repay the full loan at the end of the term. Repayment mortgages typically have higher monthly costs but reduce the loan balance over time.

Interest rates and fees

Your rate will depend on market conditions and your financial profile, including credit score, deposit amount and rental income potential. Checking the annual percentage rate of charge (APRC) can help you compare overall costs.

As buy-to-let mortgage costs vary between lenders, the best way to find out how much you’ll pay is to compare quotes and explore different mortgage options.

What additional fees might I need to pay on a buy-to-let property?

Owning a buy-to-let property can be a great investment, but it's important to keep in mind the various costs that come with it. These extra fees and taxes might surprise you, so here’s a quick rundown of what you might need to think about.

  • Stamp duty: If you're buying a property additional to your own residential property, you’ll typically pay a higher rate of stamp duty land tax (SDLT). This is something to factor in if you're already a homeowner.

  • Income tax: You’ll pay income tax on any rental income you earn above your personal allowance, with the first £1,000 of your rental income being tax-free. You can also deduct some allowable expenses, like insurance, letting agent fees and maintenance costs.

  • Capital Gains Tax: If you decide to sell your property and make a profit, you could be hit with Capital Gains Tax (CGT) on the amount above your annual allowance of £3,000.

  • Maintenance costs: Properties need upkeep, so be sure to budget for regular repairs and maintenance.

  • Landlord insurance: This includes buildings insurance and other covers like unoccupied property or rental protection insurance. It’s an essential part of safeguarding your property.

  • Letting agency fees: If you use a letting agent, you’ll need to pay them for managing your property. This can be a useful service, but don’t forget to include it in your budget.

  • Safety inspections: As a landlord, you’re responsible for ensuring the property is safe for your tenants, which includes paying for annual gas safety checks.

  • Valuation fees: Lenders will want to know your property's value, so they'll arrange a valuation. Costs can vary, but it's wise to budget for this.​

  • Legal fees: Whether it's a solicitor or conveyancer, you'll need legal help to navigate the process, especially if you're switching lenders.​ Legal fees for home buying are usually around £2,000 (including VAT at 20%), but the exact cost can vary depending on the property and how complex the work is.

  • Local searches: If you’re buying a property, your solicitor will also carry out local searches – usually costing £250–£300.

  • Arrangement fees: Some lenders charge a fee to set up your mortgage. Expect to pay anywhere between £1,000 to £2,500 as a guide. ​

  • Early Repayment Charges (ERCs): Planning to pay off your mortgage early? Be aware of potential ERCs, which can apply if you overpay beyond a certain limit.

  • Survey costs: If you're considering a detailed property survey, this will be an additional expense to keep in mind.​

It’s always a good idea to factor these costs in when deciding if buy-to-let is right for you, and make sure to budget accordingly.

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Answering your questions about buy-to-let mortgages

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Page updated on 4th September 2025, Reviewed by Richard Groom