How Much Deposit Do You Really Need for a Buy-to-Let as a New Landlord?

Many lenders will accept deposit levels from 20% to 25% of the property’s value for buy-to-let mortgages, though 25% is currently the most common “gateway” threshold. Some mainstream or specialist lenders may allow 20%, especially for very strong applicants, but expect higher interest rates, stricter rental coverage tests, or limited product choice. For higher security or in more complex cases (e.g. new builds, multiple properties, limited company ownership), 30-40% deposits are often required.

Your deposit amount directly influences your interest rate, affordability buffer, and lender options. Many first-time landlords find that targeting 25-30% gives a balanced mix of competitive rates and wider access.

At Manor Mortgages, we often help clients with “marginal” deposits secure suitable lenders through compensating factors (strong income, low debt, clean credit).

Updated: 10 November 2025

Table of Contents

1. Why deposit matters more for buy-to-let

2. Typical deposit ranges in 2025

3. What drives deposit requirements?

4. Lender Acceptance Spectrum concept

5. Policy exceptions & compensating factors

6. Step-by-step deposit journey

7. How corporate (Ltd) vs personal ownership affect deposit

8. Common mistakes & expert tips

9. Case Study: First-time landlord with 22% deposit

10. FAQs

11. Next steps & checklist

    
    

1. Why Your Deposit Matters More for Buy-to-Let

• Lenders view buy-to-let mortgages as higher risk: your income depends on tenants, void periods, maintenance, rent defaults.

  
  

• Repossessing or selling a tenanted property is more complex.

  
  

• Deposit is the buffer that reduces the lender’s risk.

  
  

• A higher deposit gives you access to better interest rates, more product choice, and lower monthly payments.

2. Typical Deposit Ranges in 2025

Deposit Tier	Approx %	What You’ll See in the Market
“Low”	20 – 25 %	Some lenders will accept 20 %, but often with stricter conditions. Many default to 25 %.
Common / Sweet Spot	25 – 30 %	Widest range of lenders and products. Many standard BTL offers are centred here.
Higher Equity / Safe Zone	30 – 40 %	Reserved for more complex cases, higher risk properties or lesser credit profiles.

According to multiple industry sources, most buy-to-let deposits hover around 25%, though a spread between 20% and 40% is common.

3. What Drives Deposit Requirements?

Borrower Profile & Credit Strength

A strong income, clean credit record, low existing debt, and experience as a landlord all help. If one of these is weak, you’ll need more deposit to support your case.

Rental Coverage (Interest Coverage Ratio, ICR)

Lenders test whether the projected rent covers a percentage above the mortgage interest, often 125% to 145% coverage. If your rent forecasts are tight, they may mandate a higher deposit.

Property Type & Location

Flats, new builds, HMOs or properties in lower-demand areas often attract stronger scrutiny and higher deposit demands.

Portfolio Size / Multiple Mortgages

If you already own rental properties, lenders may ask for a bigger deposit for each new one to manage cumulative risk.

Structure: Personal vs Limited Company

Lenders often see company purchase as slightly more complex risk, so may demand 30 - 35% instead of 25%.

Market Conditions & Competition

When lending is competitive, some lenders push lower deposit deals; when risk appetite is low, they tighten.

4. The “Lender Acceptance Spectrum” Concept

Envision a continuum of lenders from very strict to highly flexible:

• Strict / High-policy lenders - demand 30-40% deposits unless cases are ideal.

• Mid-tier / Balanced lenders - allow 25-30% with moderate underwriting margins.

• Flexible / Specialist lenders - may accept 20% or slightly less if compensating factors are strong.

Your job (or your broker’s) is to position your application toward the more flexible end by bringing strong income, low debt, clean history, and solid rental forecasts.

5. Policy Exceptions & Compensating Factors

Some lenders will waive stricter policy if you bring stronger compensating factors.

Examples:

• Exception: accept 20% deposit even though policy says 25%, because you have very high income, low debt, proven landlord track record.

• Exception: accept slightly lower rental coverage if you have substantial reserves or additional security.

• Exception: for a high-value property, accept a slight policy breach because the yield is strong or location is excellent.

These policy exceptions are where an experienced broker adds real value, evaluating which lender might stretch, and structuring the case to justify it.

6. Deposit Journey: Step by Step

1. Determine your target property value

   
   

2. Estimate your deposit range (20 - 40%)

   
   

3. Calculate what your rental income must cover (ICR stress test)

   
   

4. Assess your finances: income, credit, debt, reserves

   
   

5. Decide ownership vehicle (personal or Ltd company)

   
   

6. Shortlist lenders by flexibility and deposit thresholds

   
   

7. Submit “fit case” packages to potential lenders with supporting documents

   
   

8. Negotiate exceptions or ask for a waiver

   
   

9. Finalise the mortgage offer and complete the purchase

   
   

At every stage, your deposit size will influence rate offered, stress tests, choice of lenders, and required documentation.

7. Personal vs Limited Company Ownership

• Many new buy-to-lets are purchased via a limited company because tax rules favour deducting mortgage interest.

  
  

• Lenders often treat companies more conservatively, so may demand 30-35% deposit instead of 25%.

  
  

• Some lenders won’t even lend to new limited companies with no trading history, pushing you toward more specialist providers.

  
  

• However, if your company is established, has strong accounts or you provide personal guarantees, the deposit gap may narrow.

8. Common Mistakes & Expert Tips

Mistakes to avoid:

• Underestimating stamp duty, legal, refurbishment costs and thinking deposit is all you need

• Focusing only on lowest deposit deal without checking interest rate impact

• Not stress-testing rental income or void periods

• Not disclosing all debts or relying too heavily on gifted deposits without evidence

Expert tips:

• Try to aim for 25-30% if you can, that’s often the sweet spot

• Build a strong income and low liabilities profile before applying

• Use compensating factors (e.g. cash reserves, low LTV on other properties)

• Always ask: “Would this lender accept a 20% deposit in a strong case?”

9. Case Study: First-Time Landlord with 22 % Deposit

Profile:

• Single applicant, full-time salary £60,000

• No existing BTL properties

• Clean credit history

• Target property £250,000

Scenario:

You have £55,000 (22%) saved, not quite at 25%. Many mainstream lenders won’t accept you yet. But using a specialist lender or a broker with flexible access, we package your case with:

• buffer of 6 months’ mortgage payments in cash

• proof of low debt commitments

• strong rental forecast with margin in stress test

We may secure approval at 22% by leaning on compensating factors, although your interest rate will be higher than at 25%. Once you build equity, you can refinance to a cheaper rate.

This kind of “in-between” case is exactly where broker experience pays off: we find the lender willing to stretch yet still acceptable to underwriters.

10. FAQs

Q: Can I get a buy-to-let mortgage with deposit less than 20%?

A: Very rarely. Some specialist lenders may consider sub-20% underwriting, but only for exceptional cases with strong compensating factors.

Q: Does putting down a larger deposit always reduce the interest rate?

A: Generally yes, the lower the LTV, the better the rate available, but diminishing returns set in beyond ~35-40%.

Q: Can I use savings from my residential property as deposit for BTL?

A: Yes, equity release or remortgaging your home can fund your BTL deposit, subject to lending rules and affordability.

Q: Are gifted deposits allowed in BTL mortgages?

A: Sometimes, but lenders require strict documentation: donor declaration, proof of funds, and its non-repayable nature.

Q: How long does it take from deposit to mortgage offer?

A: Typically 4-10 weeks depending on complexity, underwriting workload, and whether policy exceptions are needed.

Q: Will switching to a limited company after purchase affect deposit or refinancing?

A: Possibly, some lenders may re-price or require higher equity when you convert ownership structure.

11. Next Steps & Checklist

1. Calculate your target deposit range (20-40%) for your prospective property.

   
   

2. Assess your personal finances: income, debts, reserves, credit.

   
   

3. Project rental income and ensure ICR stress coverage (125-145%).

   
   

4. Decide whether to purchase personally or via a company.

   
   

5. Speak to a broker who can access specialist lenders and structure exceptions.

   
   

6. Package strong documentation early (bank statements, proof of savings, credit reports).

   
   

7. Ask your broker: “Which lenders might consider a 22% deposit in my profile?”

   
   

8. Only commit to a mortgage offer once all costs (stamp duty, legal, refurb) are covered by your deposit + buffer.

At Manor Mortgages, we’ve helped clients in the last year secure BTL mortgages with deposits below traditional thresholds by structuring strong cases and negotiating exceptions. We don’t simply find you a lender, we position your application where an underwriter can’t refuse.

For tailored advice on how much deposit you need, call 01275 399299 or get in touch today.

Written by Ben Stephenson, CeMAP-qualified Mortgage Broker, and reviewed by our Mortgage Experts.

Manor Mortgages is FCA authorised (496907), has operated for nearly 30 years, and holds a 4.9 star average rating on Google. We have helped thousands of clients successfully secure the right mortgage. Based in Bristol, we assist nationwide.