Buy-to-let mortgages explained:
Everything you need to know
Thinking of investing in rental property? Buy to let mortgages are designed specifically for landlords, and they work quite differently to standard residential mortgages.
In this guide, we explain everything you need to know about buy to let mortgages—from how they work to who can apply, what they cost, and how OneDome can help you secure one.
What are buy-to-let mortgages?
Buy to let mortgages are designed for people purchasing a property to rent out, rather than to live in. They differ from regular (residential) mortgages in a few key ways, including how repayments work, how much deposit you’ll need, and the interest rates on offer.
How are buy-to-let mortgages different?
- Most buy to let mortgages are interest-only, meaning you only pay the interest each month, not the loan itself.
- The full loan (capital) is repaid at the end of the term, often by selling the property.
- You’ll typically need a larger deposit (often 25% or more).
- Interest rates and fees tend to be higher.
- Stamp duty is also more expensive on second properties.
Why do buy to let mortgages cost more?
Lenders consider buy to let mortgages higher risk than residential ones. Risks include:
- Missed rental payments
- Problem tenants
- Empty periods (known as “voids”)
Because of these risks, lenders charge higher interest rates and require bigger deposits, typically starting at 25%, but sometimes rising to 40% for larger loans.
Who can apply for a buy to let mortgage?
Not everyone qualifies. To be eligible for a buy to let mortgage, lenders typically require that you:
- Earn at least £25,000 a year
- Have a good credit score
- Have minimal outstanding debts
- Already own your own home
- Are under a certain age (many lenders have age limits)
Note: You don’t always need to be a full-time landlord—some lenders accept first-time investors.
Buy-to-let mortgage costs & fees
Aside from the loan itself, there are other costs to factor in:
-
- Landlord insurance
- Letting agent fees (if you use one)
- Maintenance and repair costs
- Legal and conveyancing fees
- Stamp Duty surcharge
- Tax on rental income (see below)
Don’t forget to budget for void periods when the property might be unoccupied and not generating income.
Understanding tax on buy to let properties
You’ll need to pay Income Tax on profits from rental income and may also be liable for Capital Gains Tax when you sell the property. Be sure to:
- Track your expenses
- Understand allowable deductions (e.g. letting agent fees, property repairs)
- Speak to a financial advisor or tax expert for full compliance
Risks to consider with buy to let mortgages
Rental Voids
Can you afford the mortgage if your property is empty? A financial safety net is crucial for covering payments during vacant periods.
Property Price Drops
Since many landlords repay the loan by selling the property, a dip in market value could leave you short. Have a backup plan in case the sale doesn’t cover the outstanding mortgage.
Can OneDome help me get a buy-to-let mortgage?
If you’re looking to get a buy-to-let mortgage, then our tool, the Mortgage Passport,is an excellent way to get started. By simply filling in a few details you can get an accurate quote of what you can afford in minutes.
As well as this, you can pre-qualify for a Mortgage in Principle and use the Mortgage Passport to show sellers that you’re in a genuine position to buy.
Stand out from other buyers with OneDome’s Mortgage Passport.
Key benefits of Mortgage Passport:
- Compare 90+ mortgage lenders to make sure you get the rate that is right for you
- Call our expert mortgage advisors on
01489 555 080 - Standing out from other buyers is easy with the Mortgage Passport
- Find out how much you can borrow in five minutes
- Personalised mortgage offers designed to meet your unique requirements
Important: Your home may be repossessed if you do not keep up repayments on your mortgage.
The smart way to find a mortgage
If you’d prefer to talk to a mortgage advisor directly, you can call 01489 555 080 between 09:00 and 17:00
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