Buy-To-Let Mortgages Explained

A buy-to-let mortgage is a type of mortgage that allows you to secure financing on a property with the intention of renting it out.

Investing in a buy-to-let property can be a lucrative opportunity if you approach it with careful planning, considering both the income and costs involved and utilising the available tips for buy-to-let investors. It’s crucial to seek tax advice before making any decisions. It might be worth reaching out to other buy-to-let landlords for additional insights.

Please note that some forms of BTL mortgages are not regulated by the FCA.

Getting a Buy-To-Let Mortgage

How do lenders assess how much you could borrow?

Lenders utilise a rental affordability calculation to assess the feasibility of your buy-to-let mortgage and determine the amount you can borrow. Buy-to-let mortgage lenders determine your loan amount by considering the projected rental income of your property when assessing your affordability.

Stress test

The monthly rental income must be at least 125% of the monthly mortgage payments for basic-rate taxpayers. This is determined by lenders using a stress test at a nominal rate of around 5% on an interest-only basis. Lenders typically require a monthly rental income that is at least 145% of the total for higher-rate taxpayers.


Certain lenders may consider personal income when assessing a buy-to-let mortgage application. This strategy, known as “top-slicing,” can help address any rental shortfall. Many buy-to-let lenders may be open to the idea of top-slicing, so it would be beneficial to have a conversation with your broker to explore this possibility.

Buy-To-Let mortgage deposit

Typically, a minimum deposit of 25% is required for buy-to-let mortgages. If you have a substantial deposit, you’ll have access to a wider selection of mortgage options and typically enjoy more favourable interest rates.

Do you want capital growth or good rental returns?

When evaluating the viability of a buy-to-let property, it’s important to consider factors such as rental yield and the potential for capital growth. Understanding both will assist you in determining what is financially feasible.

Rental yield

Rental yield is a key metric that helps assess the ongoing profitability of a property. It’s crucial to carefully evaluate the potential rental yield before making a buy-to-let investment.

Capital growth

The increase or decrease in the value of a property over time is referred to as capital growth or capital appreciation. Typically, this occurs as a result of fluctuations in the property market or enhancements made to the property. Calculating your potential capital growth can assist in determining the necessary improvements for a buy-to-let property and identifying the optimal time for selling.


  • You purchase a property for £250,000
  • Its current market value is £300,000
  • The capital growth is £50,000 (£300,000-£250,000)
person using calculator

Buy-To-Let Mortgage Fees, Costs, and Deposit

What deposit is needed for Buy-To-Let?

Typically, a buy-to-let mortgage requires a minimum deposit of 25% of the property purchase price.

Buy-to-let mortgages can vary significantly, and the deals on offer are influenced by various factors. These include the amount of deposit you can provide and your monthly repayment capacity, among others.

Buy-To-Let insurance

Most buy-to-let mortgage lenders require you to have buildings insurance before they will lend to you. It’s crucial to carefully consider insurance options while keeping your long-term goals in mind. If you have plans to expand your property portfolio in the future, it could be beneficial to consider a policy that offers the flexibility to add more properties at a later time. Being proactive and considering the future when you purchase your policy will ensure that you have flexibility down the line.

It is the tenant’s responsibility to obtain contents insurance, but it would be wise for you, as the landlord, to kindly remind them – or have the lettings agent do so – to fulfil this obligation.

Survey fees

Survey fees can consist of a range of expenses, from a basic property valuation to a comprehensive structural survey. The level of investigation required for your property will vary based on factors such as your lender, personal preferences, the mortgage you’re seeking, and the type of property you’re buying. A typical valuation will provide an assessment of the value, offer a rental evaluation, and provide an opinion on the property’s suitability as collateral for lending. A homebuyer’s report provides not only the information typically found in a valuation, but also a detailed assessment of the property’s current condition.

Maintenance fees

Landlords are accountable for maintaining the property and handling the rental income. This can be quite overwhelming. Consider hiring a lettings agent to efficiently manage your property, especially if you have a busy schedule with multiple investments/properties to handle.

It’s important to consider that lettings agents typically charge a percentage of the rental income, along with VAT. However, they can significantly alleviate some of the everyday challenges that come with buy-to-let investments.

Stay up to date on any updates to buy-to-let tax regulations and fees here.

Best areas for a Buy-To-Let property

Choosing the ideal location for a buy-to-let property is dependent on your financial resources, strategy, and geographical preferences.

When determining the best location for your purchase, take into account these helpful tips for buy-to-let investments:

  • Visit the areas that you’re interested in, and speak to estate agents about the area.
  • Use the UK House Price Index to find average house prices within the UK or in certain regions.
  • Look at the statistics, the Government publish stats on rental prices each month, so you can work out how much income your property is likely to make.

You should consider:

  • Demand for rental property in the area that you’re looking to buy in
  • The type of properties in the area (e.g. houses, flats)
  • The type of tenants in the area, you can check this by looking at what is in the area (e.g. A university would suggest that the tenants are students, however, schools suggest tenants would be families with children)
  • How far away the property is from your home or office? Unless you intend to be hands-off when managing the property, it would make sense to purchase a property you can access easily, in the case of an emergency or to fulfil your responsibilities as a landlord.

How to choose the right Buy-To-Let property

Here are some tips to help you choose the right Buy-To-Let property.

Set a budget

The budget you have at your disposal will frequently dictate the range of properties that are accessible to you, as well as their respective locations. Take some time to carefully consider your financial situation and the potential rental income you can expect. Having a clearer point of reference will help you when researching the house prices and rental rates in the areas where you plan to buy.

Factor in your mortgage

Make sure to factor in the cost of your buy-to-let mortgage when calculating your finances. Typically, landlords opt for a buy-to-let mortgage to finance their investment. This requires them to allocate funds for a deposit, usually amounting to at least 25% of the purchase price. Discover more about various mortgage types in our comprehensive guide.

Talk to a local Estate Agent

Local estate agents are a great resource for finding suitable properties, providing valuable insights into the local rental market, and assisting you in narrowing down your search.

Check your financial forecast

Ensure that you possess the necessary financial resources to cover any unforeseen expenses. It is advisable to allocate funds for periods when the property may be vacant, such as during tenant transitions.

Appeal to a specific tenant type

Consider the kind of tenant you wish to attract. Families may prefer to reside in close proximity to schools, while young professionals may prioritise the accessibility to transport hubs. If you’re interested in renting your property to students, it’s worth considering properties that are located near university campuses.

buy-to-let sign on building

Buy-To-Let cost-saving advice

  • Promote your listings on popular letting portals such as Rightmove and Zoopla. They provide you with the tools to efficiently handle your property on your own, potentially resulting in greater cost savings compared to hiring a letting agent.
  • Consult with a broker regarding limited company buy-to-lets – These can occasionally provide specific tax advantages for individuals in higher tax brackets.
  • Take charge of managing your property instead of relying on a letting agent – this way, you’ll have greater control over aspects such as tenant fees.

Is a Buy-To-Let property a good investment?

Investing in buy-to-let properties can be a wise decision, as long as you are able to generate a profit from them. For most landlords, the value lies in having an additional source of steady income and return on investment.

Before making a decision on whether buy-to-let investments are suitable for you, it’s important to consider several factors. These include the potential income based on the property’s location, the number of potential tenants, and any necessary property modifications before renting it out. Take into account the frequency of necessary maintenance work, the cost of maintenance fees and taxes, and the potential for capital growth.

If, upon careful consideration of the information provided, you believe that you can generate a satisfactory monthly or annual profit, then buy-to-let might be a suitable investment for you.

Which Buy-To-Let mortgage is right for you?

Now let’s discuss how to choose the most suitable mortgage for your needs. Most buy-to-let mortgages operate on an interest-only basis, where you make monthly interest payments and settle the mortgage balance at the end of the term.

It’s important to consider various rates and setups, including fixed rates, trackers, discount rates, and limited company buy-to-lets. The most suitable buy-to-let mortgage for you will be determined by your unique financial circumstances and specific requirements.

After you’ve made a decision on the most suitable buy-to-let mortgage for your needs, speak to us, and we can source the best lender for you.

Will you need a mortgage to purchase your Buy-To-Let property?

If you have a residential mortgage for a property, you usually cannot rent it out. In this case, you will need a buy-to-let mortgage to purchase a buy-to-let property, unless you can afford to buy a property outright.

If you are currently residing in the property you wish to rent out and have a residential mortgage, you have the choice to switch to a buy-to-let mortgage or seek the lender’s permission to let. Your bank or building society grants you permission to let your home with a residential mortgage through a process called consent to let. As an example, Halifax mentions that if individuals who are interested in becoming buy-to-let landlords do not possess a buy-to-let mortgage and choose to rent out their property, they will be required to seek permission from the mortgage provider. However, there is no guarantee they will agree.

How to be a successful landlord

If you’re thinking about becoming a part of the buy-to-let landlord community, it’s natural to aspire to be the best landlord you can be. If this information is of interest to you, here are some helpful tips for landlords looking to invest in buy-to-let properties:

  • Keep up with your agreements and responsibilities
  • Communicate with tenants and answer questions quickly
  • Spend time building a relationship with your tenants
  • Stay up to date with who is renting your property
  • Maintain contact with your estate agent, if you decide to go down this route
  • Consider external influences that could impact your tenant and be willing to provide flexibility and solutions

How to make money with Buy-To-Let Property

In order to generate income from a buy-to-let property, it is essential to set the rent at a level that will cover all expenses, including the mortgage, maintenance, taxes, and any fees related to using an estate agent, unless you choose to handle it privately.

Another way to generate income through a buy-to-let property is by enhancing its value and then selling it. As mentioned earlier, this is also referred to as capital growth, which highlights the potential profits you could earn from selling your buy-to-let property.

What taxes do you pay on a Buy-To-Let?

When purchasing a buy-to-let property, it is important to note that you will need to pay both Stamp Duty Land Tax and Income Tax. If you decide to sell the property at some point, Capital Gains Tax will also need to be paid. Below, we provide further information on each of these taxes.

Stamp Duty Land Tax

Stamp Duty Land Tax is applicable to properties and land in England and Northern Ireland that exceed a specific value.

When you buy a residential property that is not your primary residence, such as a second home or a buy-to-let, you will be required to pay a 3% surcharge in addition to the standard Stamp Duty rates.

Keep up to date with the latest SDLT information here on the government website.

Income Tax

Income Tax on rental income is also required to be paid by owners of buy-to-let properties. You have the option to claim a £1000 allowance or deduct specific expenses.

Capital Gains Tax

Capital Gains Tax (CGT) is applicable when selling a property that is not your primary residence. The profit or capital gain you make from the sale is subject to taxation. Your CGT payment will be determined by your personal income and the profit you make.

property with coins stacked at side

Your responsibilities as a landlord

Being a landlord entails a multitude of responsibilities. Below, we have outlined a few factors that you should take into account.

How do tenancy agreements work?

There are different types of tenancy agreements. An assured shorthold tenancy (AST) is the most popular option. This agreement outlines the legal terms and conditions of a tenancy. ASTs can be either fixed term or periodic, with options for week-by-week or month-by-month durations.

ASTs typically have a duration of 6 – 12 months. The AST provides information on the tenant’s rent obligations, repair responsibilities, eviction notice, rent increase policies, tenancy duration, and the tenant’s right to deposit protection.

Do landlords need to get a Gas Safety Certificate?

As a landlord, it is necessary to obtain a gas safety certificate. You must contact a Gas Safe-registered engineer to conduct the required check. It is a legal requirement to conduct a gas safety check every 12 months and provide your tenants with a certificate. In addition, it is important to schedule a gas safety inspection within 12 months of installing a new gas appliance in your property.

Do landlords need to carry out an Electrical Safety Check?

The presence of an official certificate for electrical safety is not mandated by law. However, there are regulations in place that specify the responsibilities of landlords in ensuring the safety of electrical equipment in their properties.

Are landlords responsible for smoke alarms?

Landlords must ensure that there is a functioning smoke alarm on each level of their property. It is important for landlords to ensure that carbon monoxide detectors are installed in rooms where solid fuel-burning appliances, such as coal or wood-burning stoves, are present. It is the landlord’s duty to ensure that all alarms are functioning properly whenever a new tenant moves in.

What is an HMO license?

If you are renting your property to three or more tenants who belong to two or more “households” and share a kitchen and bathroom, it might be necessary for you to obtain an HMO licence from your local authority. It would be wise to consult with your broker to inquire about the various mortgage options available for HMOs, as different lenders may offer different products.

What should landlords have to do with tenants’ deposits?

It is important for landlords to place their tenants’ deposits in a government-approved deposit protection scheme. The tenancy deposit scheme serves as a valuable mediator for tenants and landlords, ensuring their protection in the event of a dispute arising at the conclusion of a tenancy.

Are there any future changes landlords need to be aware of?

The proposed legislation indicated that starting in 2025, landlords would face the possibility of new tenancies being prohibited on rental properties with EPC ratings of D or below. It is highly probable that the landlord would be responsible for ensuring that their properties have an EPC rating of C or above.

Although the situation has changed, the Government will still encourage households to enhance energy efficiency whenever possible.

Other landlord responsibilities

As a landlord, you are expected to:

  • Make sure the property is safe for tenants
  • Deal with repairs to the structure and exterior of the property
  • Maintain the water and heating systems
  • Ensure the furniture meets fire safety regulations
  • Make sure electrics and gas are safe
  • Provide your tenant with the correct paperwork by law
  • Take out buildings insurance on the property.

General Buy-To-Let tips

If you’re interested in becoming a buy-to-let landlord and reading our guide, here are some tips to keep in mind:

  • Choose a modern property
    While you can rent out any property, newer properties tend to let more quickly and require less maintenance from you.
  • Do your checks
    Make sure you check all tenant references and conduct credit checks
  • Clean thoroughly
    After a long tenancy, make sure to clean and redecorate your property
  • Be cautious with a letting agent
    When selecting a letting agent, make sure they are a member of the Association of Residential Letting Agents and the National Approved Lettings Scheme.

Get Expert Advice

As a whole-of-market mortgage broker, we have access to a wide range of lenders, as a result, we can offer the best mortgage solution for you and your needs.

To discuss your lending requirements, speak to one of our experienced brokers today on 0800 195 6345, or email us at, or fill out our contact form here.

Important Info

Your home may be repossessed if you do not keep up with mortgage repayments.

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