Buy to Let Mortgages Explained
Buy to let (BTL) mortgages are designed for properties you intend to rent out rather than live in. They work differently from residential mortgages, and understanding the key differences will help you make a more informed investment decision.
How Buy to Let Mortgages Differ
BTL mortgages typically require a larger deposit — usually at least 25% — and interest rates are generally higher than residential deals. Most BTL mortgages are interest-only, meaning you only pay the interest each month and repay the capital at the end of the term (usually through selling the property or remortgaging).
Rental Income Calculations
Lenders assess affordability differently for BTL. Instead of your personal income, they focus on the expected rental income — typically requiring it to cover 125–145% of the monthly mortgage payment. Your broker will help you understand whether a property stacks up financially before you commit.
Tax Considerations
Since 2020, landlords can no longer deduct mortgage interest from rental income before calculating tax. Instead, a 20% tax credit applies. Higher-rate taxpayers are particularly affected. Many landlords now hold properties through a limited company (SPV) to mitigate this — speak to your accountant and mortgage broker together.
Portfolio Landlords
If you own four or more mortgaged properties, you are classified as a portfolio landlord. Lenders apply stricter underwriting, assessing your entire portfolio rather than each property in isolation. Specialist lenders and brokers with portfolio experience are essential in this space.
Thinking about investing in property? Our buy to let specialists will help you find the right mortgage and structure your investment correctly from the start.