What is a buy-to-let mortgage?
A buy-to-let (BTL) mortgage is a loan specifically designed for purchasing a property that you intend to rent out to tenants rather than live in yourself. Unlike residential mortgages, BTL mortgages are assessed primarily on the expected rental income from the property, alongside the borrower’s personal financial position. For UK landlords and property investors, choosing the right BTL mortgage is one of the most important decisions affecting long-term profitability. Fundably’s flagship BTL lenders are Barclays for mainstream BTL mortgages and Lendco for specialist and short-term scenarios, alongside other panel lenders covering both personal and limited company (SPV) lending.
Most buy-to-let mortgages require a minimum deposit of 20 to 25% of the property value, though some lenders offer products at higher loan-to-value ratios for experienced landlords. Interest rates are typically higher than residential mortgage rates, reflecting the additional risk lenders associate with investment properties. These products are generally not regulated by the Financial Conduct Authority (FCA) when used purely for investment purposes.
How do buy-to-let mortgages work?
Lenders assess BTL mortgage applications differently from residential mortgages. The two key factors are:
- Rental coverage ratio. Most lenders require the expected monthly rental income to cover 125 to 145% of the monthly mortgage payment at a stressed interest rate (typically 5 to 5.5%). This ensures the property generates enough income to service the debt even if rates rise.
- Personal income. Many lenders also require the applicant to have a minimum personal income, often £25,000 per year, though some specialist lenders have no minimum income requirement.
For portfolio landlords (those with four or more mortgaged buy-to-let properties), lenders apply additional scrutiny. They assess the overall portfolio’s performance, including total rental income, aggregate borrowing and the landlord’s experience. This was introduced under the Prudential Regulation Authority’s portfolio landlord rules in 2017.
Types of buy-to-let mortgage
Choosing the right mortgage structure depends on your investment strategy, cash flow requirements and view on interest rate movements.
Fixed-rate mortgages. Your interest rate is locked for a set period, typically 2 or 5 years. This gives you predictable monthly costs and protects against rate rises. Fixed-rate products are popular with landlords who want certainty when budgeting, particularly those with tight rental coverage ratios.
Variable-rate mortgages. The interest rate moves with the lender’s standard variable rate (SVR) or tracks the Bank of England base rate. You benefit when rates fall but are exposed when rates rise. Tracker mortgages are a common form of variable-rate BTL product.
Interest-only mortgages. You pay only the interest each month, with the full loan balance repaid at the end of the term (usually through selling the property or refinancing). Interest-only is the most common structure for buy-to-let investors because it keeps monthly costs low and maximises cash flow.
Capital repayment mortgages. You pay both interest and principal each month, gradually reducing the loan balance over the term. This builds equity faster but results in higher monthly payments. Some landlords use this approach for properties they intend to hold long-term and eventually own outright.
What costs are involved in a buy-to-let mortgage?
Beyond the interest rate, there are several costs to factor into your investment calculations:
- Arrangement fees. Typically £1,000 to £2,000, though some products charge a percentage of the loan amount. These can usually be added to the loan balance.
- Valuation fees. The lender will require a property valuation before completing, usually costing £150 to £500 depending on the property value.
- Stamp Duty Land Tax. Buy-to-let purchases attract the standard SDLT rates plus a 3% surcharge on each band. For a £250,000 property, this adds up to a significant upfront cost.
- Broker fees. If you use a mortgage broker, there may be a fee for their service, though many brokers (including Fundably) are paid by the lender.
- Legal fees. Conveyancing costs for the purchase, typically £800 to £1,500.
Understanding the full cost picture is essential before committing to a purchase. Our guide to property finance covers the broader range of funding options available to UK property investors, including bridging loans and development finance.
Can I get a buy-to-let mortgage through a limited company?
Yes. An increasing number of UK landlords now purchase buy-to-let properties through a special purpose vehicle (SPV), typically a limited company set up specifically for property investment. This structure can offer tax advantages, particularly since the phased restriction of mortgage interest relief for individual landlords introduced from April 2017.
Limited company BTL mortgages are available from many lenders, though the product range and rates can differ from personal BTL mortgages. Some lenders specialise in SPV lending, and rates have become increasingly competitive. Fundably’s 50+ lender panel includes specialist limited company BTL lenders, so you can compare both personal and corporate options in a single application.
How does Fundably help landlords find the right mortgage?
Whether you are purchasing your first buy-to-let property or adding to an existing portfolio, Fundably gives you access to 50+ UK lenders through one short application. Our flagship BTL lenders are Barclays for mainstream BTL mortgages and Lendco for specialist and short-term scenarios, with additional panel lenders covering portfolio landlords, SPV structures and complex cases.
The initial matching uses a soft credit check, which does not affect your credit score and is not visible to other lenders. As a commercial finance broker and NACFB member, Fundably handles the comparison work and supports you through to completion.
The process works as follows:
- Complete a short application covering the property details, expected rental income and your financial position (approximately 5 minutes).
- Fundably matches you with lenders whose criteria fit your profile.
- Review offers and choose the product that best suits your investment strategy.
- Receive support through the application and completion process.
If you are also considering purchasing at auction and need fast finance to meet the 28-day completion deadline, see our guide to auction finance for details on bridging loan options.
Important notice
Buy-to-let mortgage products are not personal or consumer mortgages and are not regulated by the Financial Conduct Authority (FCA) when used purely for investment purposes. Fundably acts as a commercial finance broker, not a lender.
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