Buy to Let Mortgages Explained
- Jun 16
- 11 min read
Updated: Jun 16
Find out how buy-to-let mortgages work, what deposit and rental income lenders want, and which landlord and property types they accept in 2026.
Quick Answer
A buy-to-let mortgage funds a property you rent out rather than live in. In 2026 most lenders want a deposit of around 25 percent, lend mainly on the rent the property earns rather than your salary, and stress-test that rent against a higher interest rate. They are usually interest-only, and limited company ownership is now common.
Reviewed by Ben Stephenson, FCA authorised (FRN 496907) · 25+ years' experience · 4.9★ on Google. Updated: 16 June 2026.
Who this guide is for
Best for anyone buying a property to rent out, from first-time landlords and homeowners adding a second property to portfolio investors and those buying through a limited company, who want to understand how buy-to-let mortgages are assessed and what lenders expect in 2026.
Key points
Lenders assess the rent, not mainly your salary.
Expect a 25 percent deposit, sometimes more.
Most buy-to-lets are interest-only.
Table of contents
What is a buy-to-let mortgage, and how is it different?
A buy-to-let mortgage is for a property you intend to rent out rather than live in, and it works differently from a residential mortgage in three important ways. Lenders lend mainly against the rent the property will earn rather than your personal income, most buy-to-lets are interest-only so the monthly payment only covers the interest, and the deposit required is larger, usually around 25 percent.
The logic is that the property is an investment, and the rent is expected to service the loan. That is why a lender's first question is not what you earn but what the property will let for, and whether that rent comfortably covers the mortgage with a margin to spare. Your own income still matters, but more as a backstop than the main event.
It is also a moving market. Rules, rates and lender appetite have shifted in recent years, and some landlords have found it harder to make the numbers work than they once did. The fundamentals still hold, though: a sensible deposit, a property that lets well, and the right lender and structure for your situation.
How do lenders decide what you can borrow?
On a buy-to-let, the headline test is rental cover, sometimes called the interest cover ratio. Lenders take the expected monthly rent and check it covers the mortgage interest by a set margin, commonly between 125 and 145 percent, at a stressed interest rate that is higher than the actual pay rate. The stronger the rent against the loan, the more you can borrow. The table below shows what a lender weighs on a buy-to-let case.
What lenders look at | Why it matters |
Rental income | Must cover the mortgage at a stressed rate, often 125 to 145 percent |
Deposit | Usually 25 percent or more; a bigger deposit eases the rental test |
Personal income | A backstop, with a minimum often around £25,000 |
Credit history | Affects which lenders and rates are open to you |
Landlord experience | First-time landlords face a slightly narrower panel |
Because the stress rate is higher than the real rate, the rent has to work hard. This is why the minimum rent a property needs to pass the stress test is often the figure that decides the deal, not your salary. Where rent falls a little short, some lenders allow top-slicing, using surplus personal income to bridge the gap.
A typical case
Take an illustrative, composite example. A landlord buys a £200,000 flat with a 25 percent deposit of £50,000, leaving a £150,000 interest-only loan. The flat lets for £950 a month. At one lender's stress rate the rent covers around 130 percent of the mortgage, so the case passes comfortably.
A second lender applies a tougher stress rate and needs the rent closer to £1,050 to lend the same amount. Nothing about the property changed, only the lender's test did. This is an illustration of the principle, not a quote or a personalised recommendation, and the figures that fit depend on your circumstances.
What deposit and rates should you expect?
Most buy-to-let lenders want at least a 25 percent deposit, though a few go to 20 percent and many reserve their best rates for 40 percent or more. A larger deposit does double duty: it widens your lender choice and makes the rental stress test easier to pass, because there is less mortgage for the rent to cover.
Rates sit a little above equivalent residential deals, reflecting the investment risk, and buy-to-let products often carry larger arrangement fees, sometimes charged as a percentage of the loan. It is worth comparing the true cost, fee included, rather than the headline rate. The Bank of England's base rate shapes pricing, and the PRA's underwriting standards set the stress-testing framework all lenders work within.
Most landlords choose interest-only, which keeps monthly payments low and the rental yield healthy, repaying the capital by selling or refinancing later. Repayment buy-to-lets exist but are less common. As ever, deposit, rate and structure interact, so the cheapest headline rate is not always the cheapest deal.
Because most buy-to-lets are interest-only, it is worth being clear from the outset about how the capital will eventually be repaid, whether by selling the property, refinancing onto a new deal, or drawing on other assets. Lenders increasingly ask about this exit, and having a credible plan, even one years away, makes for a stronger application and a healthier investment. It also shapes whether a pure interest-only approach suits you, or whether overpaying or a part-repayment arrangement gives you more comfort. Thinking past the first deal, to how the property fits your wider finances, is what separates a casual purchase from a sound long-term investment.
What does it cost to run a buy-to-let?
Beyond the mortgage, a buy-to-let has running costs that decide whether it actually makes money. Letting-agent fees if you use one, landlord insurance, maintenance and repairs, periods between tenants when no rent comes in, ground rent and service charges on a flat, and any licensing fees all eat into the rent. A realistic budget builds these in rather than assuming the full rent is profit.
Yield is the usual measure of return. Gross yield is the annual rent as a percentage of the property price, while net yield subtracts the running costs and gives a truer picture. A headline gross yield can look attractive, but two properties with the same gross figure can perform very differently once costs and void periods are counted. The strongest rental areas tend to balance a good yield with steady tenant demand.
It is worth stress-testing your own numbers, not just the lender's. Model what happens if the rent drops, a boiler needs replacing, or the property sits empty for two months, and check the figures still hold. The landlords who do well treat a buy-to-let as a business with a budget, not a guaranteed income.
Personal name or a limited company?
One of the biggest decisions a landlord makes is whether to buy in their personal name or through a limited company, often a special purpose vehicle set up just to hold property. The choice affects how lenders assess you, the rates available, and the tax you pay.
On the lending side, limited company buy-to-let has become mainstream, with a wide panel of lenders, though rates can sit a little higher and there are extra company costs. Lenders look at the company's directors and shareholders, and a new company with no trading accounts can still borrow because they assess the people behind it. The stress test for a limited company can also be more generous than borrowing personally.
Personal name | Limited company |
Simpler and cheaper to set up | Wider lender panel now, with extra company costs |
Stress test can be tighter for some | Stress test is often more generous |
Fewer options for large portfolios | Common for portfolios and serious investors |
Whether a company is worth the extra cost depends on your plans, and our guides on choosing between personal and company ownership and on limited company buy-to-let walk through it. Tax is a major part of this decision and depends on your circumstances, so it is worth speaking to a qualified tax adviser alongside a specialist broker before you commit.
What kind of landlord are you?
Buy-to-let is not one-size-fits-all, and lenders treat different landlords differently. First-time landlords face a slightly narrower panel and sometimes a larger deposit, while seasoned landlords have more choice. You do not always need to own your own home first, though borrowing as a first-time buyer or without owning a home narrows the field.
Your stage of life matters too. Retired and older landlords can still borrow, as buy-to-let often has more generous age limits than residential, because the rent rather than earned income carries the loan. The government-backed Money and Pensions Service publishes free, impartial guidance for people becoming landlords.
Some situations need a specific product. Renting to a family member is usually a regulated buy-to-let, which the FCA oversees, with a narrower panel, and if circumstances change there is a point where it makes sense to switch from consent-to-let to a full buy-to-let. Matching your situation to the right lender is where most of the value is.
What kind of property can you let?
The property itself shapes which lenders will help and on what terms. A standard house or flat let to a single household is the easy case. Step outside that and the panel narrows, but the options are still there.
Houses in multiple occupation can earn higher yields but need specialist lenders and often a licence. Holiday and short-term lets are assessed on seasonal income and have grown popular, though the rules and demand vary. Student lets follow their own rhythm and criteria, with higher gross yields but more management.
Buying a property with a tenant already in place can be efficient but limits your lender choice, and there are firm rules about whether you can ever live in a buy-to-let, which generally you cannot without the lender's consent. The common thread is that the more unusual the let, the more a broker who knows the specialist panel earns their keep.
Being a landlord: rules and responsibilities
A buy-to-let comes with legal duties as well as a mortgage. Lenders increasingly expect properties to meet a minimum energy efficiency standard, and the rules here have been tightening, so an older property may need work before it can be let. Gas and electrical safety checks, smoke and carbon monoxide alarms, and protecting the tenant's deposit in an approved scheme are all legal requirements.
Different lets carry different rules. Houses in multiple occupation often need a licence from the council, some areas operate selective licensing for ordinary lets, and holiday and student lets have their own conditions. Getting this wrong can mean fines and can breach your mortgage terms, so it is worth checking the local rules before you buy.
Letting also brings ongoing admin: referencing tenants, drawing up a proper tenancy agreement, handling repairs, and keeping records. Many landlords use a letting agent to manage this, at a cost, while others self-manage. Either way, treating the legal side seriously protects both your tenants and your investment, and the free guidance from the Money and Pensions Service is a sensible starting point.
Growing and remortgaging a portfolio
As your holdings grow, the rules change. Lenders treat you as a portfolio landlord once you own four or more mortgaged buy-to-lets, which brings extra checks on the whole portfolio, not just the property you are buying. Remortgaging once you own several properties works differently, and dedicated portfolio landlord lenders can assess the book as a whole.
Where you buy matters as much as how. Yields vary widely across the country, and the strongest rental hotspots can be the difference between a property that sails through the stress test and one that struggles. Structuring purchases efficiently, for example buying through a company share purchase, is something portfolio investors weigh carefully with their advisers.
Scaling a portfolio rewards planning. Keeping accounts tidy, spreading lenders to avoid over-exposure limits, and reviewing the whole portfolio at each remortgage all help. Under the PRA's portfolio rules, lenders look at the aggregate position, so a single weak property can affect new lending across the board.
Expert tips and common mistakes
Tips
Work out the rent the property will realistically achieve before you offer, as it decides what you can borrow.
Save the largest deposit you sensibly can, since it eases the stress test and improves the rate.
Compare the all-in cost including fees, not just the headline rate.
Get advice on structure and tax before you buy, not after, as unwinding the wrong choice is costly.
Common mistakes
Assuming your salary drives the loan, when it is mainly the rent that does.
Forgetting the larger deposit, fees and stress test that make buy-to-let different.
Overlooking landlord licensing and the rules for HMOs, holiday lets and student lets.
Moving into a buy-to-let, or letting it informally, without telling the lender.
Frequently asked questions
How much deposit do I need for a buy-to-let?
Usually at least 25 percent, though a few lenders accept 20 percent and the best rates often need 40 percent. A bigger deposit also makes the rental stress test easier to pass.
Do lenders look at my income or the rent?
Mainly the rent. Lenders check the rent covers the mortgage at a stressed rate, often by 125 to 145 percent. Your income is a backstop and usually has a minimum, often around £25,000.
Are buy-to-let mortgages interest-only?
Most are, which keeps payments low and yields healthy, with the capital repaid by selling or refinancing later. Repayment buy-to-lets are available but less common.
Should I buy in a limited company?
It depends on your plans and tax position. Company buy-to-let is now mainstream with a wide lender panel, but there are extra costs. Speak to a tax adviser as well as a broker before deciding.
Can I get a buy-to-let as a first-time buyer?
Sometimes, though the panel is narrower and lenders may want a larger deposit. Owning your own home first widens your options considerably.
Can I live in my buy-to-let?
Not without the lender's permission. A buy-to-let mortgage is for letting, not living in, and moving in without consent breaches the terms. Switching to a residential or consent-to-let arrangement is the proper route.
What is a portfolio landlord?
Usually someone with four or more mortgaged buy-to-lets. Lenders apply extra checks across the whole portfolio, so the overall position affects new lending, not just the property you are buying.
More buy-to-let guides
Summary
A buy-to-let mortgage is judged mainly on the rent the property earns rather than your salary, with a deposit of around 25 percent and a stress test the rent must clear. Most are interest-only, and many landlords now buy through a limited company. Match the property, your situation and the ownership structure to the right lender, and buy-to-let remains a workable route to building a property portfolio in 2026.
Updated: 16 June 2026
Written by Ben Stephenson, CeMAP-qualified Mortgage Broker.
Manor Mortgages Direct is FCA authorised, FRN 496907, has 25 years trading, is highly positively reviewed and 4.9 rated on Google, and has helped thousands secure the right mortgage. Bristol-based mortgage brokers, assisting clients nationwide.
Sources
Prudential Regulation Authority, Underwriting standards for buy-to-let mortgage contracts (SS13/16) - https://www.bankofengland.co.uk/prudential-regulation/publication/2016/underwriting-standards-for-buy-to-let-mortgage-contracts
FCA, Mortgages and Home Finance: Conduct of Business sourcebook (MCOB) - https://www.handbook.fca.org.uk/handbook/MCOB/
Bank of England, Bank Rate and monetary policy - https://www.bankofengland.co.uk/monetary-policy/the-interest-rate-bank-rate
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