Beginner’s guide to buy-to-let mortgage finance

This guide covers the basics a broker needs when advising a client who is new to buy-to-let. It also works as a plain-English reference to share with landlord clients. For the full detail on how lenders differ, see our guide to buy-to-let lender criteria.

A buy-to-let mortgage is a loan for a property bought to rent out, not to live in. The lender assesses it mainly on the rent the property will earn, rather than only on the borrower’s personal income. Most buy-to-let loans need a deposit of at least 20% to 25%, and most are interest only. How much a landlord can borrow depends on three things: the lender’s maximum loan-to-value (LTV), a rental stress test, and whether the lender accepts the property type.

What is a buy-to-let mortgage?

A buy-to-let mortgage funds the purchase or remortgage of a property that is let to tenants as an investment. It is a separate product from a residential mortgage, and one cannot be used in place of the other.

There are three main categories, and the distinction matters because it decides which FCA permission a broker needs.

Unregulated buy-to-let. Most buy-to-let lending is not regulated by the FCA, because the landlord is treated as running a business and the tenants have no family ties to them. The majority of cases are unregulated.

Family buy-to-let (regulated). A buy-to-let becomes regulated in the same way as a residential mortgage when a close family member will occupy at least 40% of the property. Advising on it requires a residential mortgage qualification and permission.

Consumer buy-to-let (CBTL). A separate FCA-regulated category for “accidental landlords” — for example, someone who inherited a property, or is letting a former home rather than buying deliberately as an investment. Firms doing consumer buy-to-let business must be on the FCA’s consumer buy-to-let register, which is separate from the permission needed for family buy-to-let.

How is a buy-to-let mortgage different from a residential mortgage?

• How affordability is assessed. A residential lender looks mainly at the borrower’s income. A buy-to-let lender looks mainly at whether the rent covers the mortgage by a set margin.
• Deposit. Buy-to-let deposits are usually larger, starting at around 20% to 25%.
• Repayment. Most buy-to-let mortgages are interest only, so the monthly payment covers only the interest and the balance is unchanged. The full balance falls due at the end of the term, so lenders want to see a credible repayment plan, typically selling the property or remortgaging onto a new deal. Remortgaging replaces the debt rather than clearing it, so it only works if the borrower can meet the new payments or plans to sell eventually.
• Rates and fees. These can be higher, because the risk profile and underwriting are different.
• Use. A residential mortgage cannot be used to buy a property to let. Letting a property on a residential mortgage without the lender’s permission breaches the mortgage terms.

Can a first-time landlord get a buy-to-let mortgage?

Yes, but fewer lenders accept borrowers with no letting history, so it is worth checking early in a case. Lenders that do accept first-time landlords often add conditions. Common ones are:

• Requiring the borrower to own their own home
• Setting a minimum personal income
• Capping the maximum LTV at a lower level
• Restricting property types, often excluding houses in multiple occupation (HMOs), multi-unit freehold blocks (MUFBs) and holiday lets

Lenders often ask for more experience on HMOs and MUFBs, commonly at least 12 months as a landlord. Some offer separate product ranges for first-time landlords buying smaller HMOs or MUFBs, usually with a lower maximum LTV and loan size.

What deposit is needed for a buy-to-let mortgage?

Deposits typically range from 20% to 40% of the purchase price or valuation. The exact amount depends on the lender’s maximum LTV, the property type and the borrower’s circumstances. A larger deposit usually has three benefits: more lenders to choose from, lower rates, and an easier rental stress test. The property is used as security for the loan.

How much can a landlord borrow on a buy-to-let mortgage?

Three things define affordability and set the maximum loan.

The lender’s maximum LTV. This caps the loan as a percentage of the property’s value.

The rental stress test. The lender checks that the rent is comfortably more than the mortgage payment, not just enough to cover it. It does this in two steps.

Step 1: a higher test rate. The lender works out the monthly mortgage payment using an interest rate higher than the one the borrower will actually pay. This is called the stress rate. It takes into account rental void periods and whether the loan would still be affordable if rates went up.

Step 2: a safety margin. The rent must then be a set percentage of that payment. This percentage is the interest cover ratio (ICR). An ICR of 125% means the rent must be at least £125 for every £100 of mortgage payment.

For example, if the payment worked out at the stress rate is £800 a month and the ICR is 125%, the rent must be at least £1,000 a month.

The stress rate and the ICR both vary with:

• the borrower’s tax status (basic or higher rate)
• the ownership structure (individual, limited company or LLP)
• the product term
• the property type

Most lenders follow Bank of England (PRA) rules on how hard to stress. Two-year fixed and tracker products are usually tested at the greater of 5.5% or the pay rate plus 2%, while five-year fixes can be tested at the pay rate itself. The pay rate is the interest rate on the mortgage product itself, which is the rate the borrower is actually charged each month.

For example, on a two-year fix with a pay rate of 4%, the pay rate plus 2% is 6%. That is higher than 5.5%, so the case is tested at 6%. With a pay rate of 3%, the pay rate plus 2% is only 5%, so the case is tested at 5.5% instead.

Required ICRs commonly range from 125% for basic-rate taxpayers and limited companies to 140% or 145% for higher-rate taxpayers. This is one reason five-year fixes and limited company structures are common where the rent only just covers the loan. Some lenders also allow “top slicing”, where the borrower’s personal income can make up a shortfall in the rent.

Whether the property type is acceptable. Lenders publish the property types they will lend on. These commonly include single lets, HMOs and MUFBs.

Stress rates change with the market, so a fixed table soon goes out of date. The reliable way to check what a client can borrow today is to run the numbers through a lender’s calculator.

How much could a landlord borrow? A worked example

To work out the maximum loan the rent supports, divide the annual rent by the ICR, then divide by the stress rate.

For example, a property earning £1,000 a month in rent, tested at a 125% ICR and a 5.5% stress rate, supports a maximum loan of about £174,500 (£12,000 ÷ 1.25 ÷ 0.055). At a 145% ICR, the same rent supports about £150,500 (£12,000 ÷ 1.45 ÷ 0.055). The LTV cap still applies, so the actual loan is the lower of the two limits.

Should a landlord buy personally or through a limited company?

Landlords can hold property in their own name or through a limited company. The company is often a special purpose vehicle (SPV), set up only to hold property. The main reason for the choice is tax:

• Individual landlords can no longer deduct mortgage interest from their rental income. They receive a basic-rate tax credit instead, currently 20%, rising to 22% from April 2027.
• Limited companies can still treat mortgage interest as a business cost.

As a result, many higher-rate taxpayers and growing portfolio landlords now buy through a company. From April 2027, under changes announced in the November 2025 Budget, individual landlords will also face new, higher property-specific income tax rates (22%, 42% and 47% for basic, higher and additional rate taxpayers), which widens the gap further for some borrowers. See HMRC’s policy paper on the change.

Limited company lending has its own criteria, such as personal guarantees from directors and rules on how the company is set up, and often carries higher rates and fees than personal borrowing. The right structure depends on the client’s tax position, so they should take an accountant’s advice. Our guide to placing limited company cases covers what brokers should check, and there is a version written for landlords to share with clients weighing the decision.

What types of property can a buy-to-let mortgage be used for?

Most lenders cover standard single lets, meaning a house or flat let to one household. Beyond that, criteria vary more widely.

• HMOs. Properties let to several unrelated tenants who share facilities. These often need a licence and meet specialist criteria. See our guide to houses in multiple occupation and our guide to large HMO lender criteria.
• MUFBs. Several self-contained flats on one freehold title, valued and lent on as a single property.
• Flats in blocks and mixed-use buildings. Lenders may restrict the number of storeys, or flats above or next to shops and other commercial premises.
• Holiday lets. These are assessed differently and often exclude first-time landlords.
• Non-standard construction, new builds and self builds. Some lenders accept these, but not all.

Properties in Scotland follow different legal and tenancy rules. See our broker’s guide to Scotland buy-to-let lenders

What role does the valuation play?

Before lending, the lender needs a valuation of the property. Traditionally this means a physical valuation, which a surveyor carries out in person before reporting back to the lender. This has to be instructed, booked and completed, and is often the slowest step in getting a case to offer. On eligible standard properties, some lenders offer an automated valuation model (AVM) instead, which produces a value from data rather than a site visit. Because there is no inspection to book, an AVM removes that wait, which can bring a case to offer noticeably sooner. AVMs are not available on every property. New builds and self builds, for example, lack the sales history an AVM relies on. HMOs, MUFBs and holiday lets usually need a physical valuation. Our guide to AVMs in buy-to-let explains which cases qualify.

What is a let-to-buy mortgage?

Let-to-buy means letting out a current home and buying a new one to live in. It usually involves two mortgages at once:

1. converting the existing residential mortgage to buy-to-let, or remortgaging onto one, so the current home can be let
2. taking a residential mortgage on the new home, which becomes the main residence

If the client only wants to let their current home without buying another, some residential lenders will instead grant “consent to let” for a limited period. Consumer buy-to-let rules can apply in either case, so the existing lender’s position always needs checking.

Lenders set their own conditions for let-to-buy. Common ones include whether the client is buying an onward home to live in, whether they already own other rental property, and how long the property has already been let.

What costs should a new landlord budget for?

The deposit is only part of the upfront cost. New landlords should also budget for the following. Tax rates and thresholds can change at each Budget, so the figures below are correct as of September 2026.

• Stamp duty. In England and Northern Ireland, an additional-property surcharge of 5% applies on top of standard rates. See HMRC’s policy paper on the surcharge. Scotland and Wales have their own equivalents.
• Lender arrangement fees, valuation fees and legal costs.
• Licensing, where the property is an HMO or sits in an area where the council requires landlords to hold a licence.
• Safety and compliance. This includes gas safety certificates, electrical checks, and an EPC. The current legal minimum EPC rating for a rental property is E; the government has confirmed plans to raise this to C by 1 October 2030.
• Ongoing costs, including letting or management fees, insurance, maintenance and periods when the property is empty.
• Tax and record keeping. Making Tax Digital for Income Tax has applied since April 2026 to landlords whose qualifying income is over £50,000, dropping to £30,000 from April 2027 and £20,000 from April 2028. Qualifying income is gross income before expenses, combining property and self-employment, so a landlord who is also a sole trader can be in scope on a smaller rental income than the threshold suggests. See gov.uk’s guidance on Making Tax Digital and our landlord guide to Making Tax Digital.

What rules apply to letting a property?

Letting is regulated, even when the mortgage is not. In England, the Renters’ Rights Act ended section 21 “no fault” evictions and assured shorthold tenancies in the private rented sector from 1 May 2026. This affects how landlords plan and how lenders view tenancy arrangements. Our broker’s guide to the Renters’ Rights Act sets out what has changed. Local licensing and planning rules can also apply, particularly to HMOs.

What are the risks of buy-to-let?

The main risks are gaps between tenants, higher payments when a fixed rate ends, the loan still being owed in full at the end of an interest-only term, falling property values, problem tenancies, and changes to tax and regulation. It is worth talking these through with a new landlord, because they decide whether a case still works in later years, not just on the day it completes.

• Void periods. Rent stops when a tenant leaves, but the mortgage payment doesn’t. Landlords need savings to cover the gap between tenancies and any work needed before re-letting.
• Higher payments when a fixed rate ends. If the landlord moves onto a higher rate, the gap between the rent and the mortgage payment can shrink or disappear. A property that passed the stress test at the start may not pass it at remortgage, which can limit the landlord’s options.
• The loan balance at the end of the term. On an interest-only mortgage, the full loan is still owed when the term ends. The landlord needs a realistic plan to repay it, such as selling the property.
• Falling property values. If the property ends up worth less than the loan (negative equity), remortgaging or selling becomes harder and may leave a shortfall to cover from other money.
• Arrears and problem tenancies. The landlord still has to pay the mortgage if a tenant falls behind on rent. In England, section 21 has been abolished, so landlords must now rely on a specific legal ground to take a property back, which can take longer.
• Tax and regulation changes. Limits on mortgage interest relief, the 5% stamp duty surcharge, the April 2027 rise in property income tax and the planned EPC C standard for 2030 have each added to landlords’ costs. Future changes are likely, so a case should work with some margin to spare.

A sensible loan-to-value, a longer fixed rate where the rent is tight, and a cash buffer all help landlords manage these risks.

Where Landbay fits

We lend through brokers only. As one example of how a lender applies the rules in this guide, here are some of our own criteria.

First-time landlords. We lend to first-time landlords at up to 75% LTV. The borrower must own and live in their current main residence. A minimum income of £25,000 a year applies until a landlord has more than 24 months’ experience.

First-time landlords buying an HMO or MUFB. Our standard HMO and MUFB lending needs at least 12 months’ landlord experience. We also offer a separate range, subject to availability, for first-time landlords buying an HMO or MUFB of up to six beds or units. It is capped at 75% LTV and £1,000,000, and borrowers must be residential homeowners. See our first-time landlord HMO and MUFB products.

Stress rates. We stress products as follows:

• Five-year fixed rates: at the pay rate.
• Two-year fixed and tracker rates: at the greater of 5.5% or the pay rate plus 2%.
• Five-year remortgages and two-year like-for-like remortgages: at the greater of 4.5% or the pay rate.

Where a case fits more than one of these, the higher stress rate applies.

ICRs. Our required ICRs by borrower type are:

Borrower type	Core standard	HMO/MUFB	Premier standard
Basic-rate individual	125%	125%	125%
Higher-rate individual	140%	140%	145%
Limited company or LLP	125%	125%	125%

We also check the affordability of the applicant’s existing portfolio against a minimum ICR of 125% at 5%.

Age. Every borrower must be at least 21. At least one borrower (or, for a limited company, one director) must be under 85 when the mortgage ends. Any other borrowers on the same application can be up to 95 by then.

Consumer buy-to-let. We do not lend on consumer buy-to-lets.

For figures on a live case, see our intermediary lending criteria.

What do brokers check when placing a buy-to-let case?

When assessing a landlord client, advisers typically check the following.

• Experience. First-time landlords narrow the choice of lenders, so check this early.
• Age. Minimum ages are commonly 18 to 21. Maximum ages usually apply at the end of the mortgage term and vary widely between lenders. Some allow an older borrower on a joint or company application as long as another borrower or director is younger.
• Income. Minimum personal income requirements vary and may be waived for experienced landlords.
• Employment and income source. Whether the client is employed, self-employed or living on rental income, and whether the type and length of income is acceptable.
• Ownership structure. Individual, joint, limited company or LLP.
• Property type and construction. Single let, HMO or MUFB. Standard or non-standard construction. Any restrictions on flats and blocks.
• Tenant type and tenancy. Some lenders exclude certain tenant types, company lets or holiday lets.
• UK residency and credit footprint. Whether the client is UK resident, an expat or a foreign national, and whether they have a UK credit history.
• Credit history. Whether the credit file is clean, and the nature and age of any missed payments or other problems.
• Valuation route. Physical or automated.
• Location. Not every lender covers every nation of the UK, especially for HMOs and MUFBs.
• Licensing and planning. Whether the property needs a licence or planning consent.
• Existing portfolio. Landlords with four or more mortgaged buy-to-let properties are treated as portfolio landlords, and lenders assess the whole portfolio, not just the new property. See our guide to buy-to-let mortgage hurdles for portfolio landlords.

To see how lenders compare on these points, read our guide on how to compare buy-to-let lenders. For a version written for landlords, see how to choose a buy-to-let lender. For cases that do not fit standard criteria, see our broker’s guide to complex buy-to-let cases.

Frequently asked questions

What is a buy-to-let mortgage?
It is a mortgage for a property bought to rent out, not to live in, assessed mainly on the expected rent. Most buy-to-let lending is unregulated. It becomes regulated where the property is let to a close family member, and a separate regulated category, consumer buy-to-let, covers accidental landlords.

Can a first-time landlord get a buy-to-let mortgage?
Yes, though fewer lenders accept borrowers with no letting history. Those that do may require the borrower to own their home, meet a minimum income, or accept a lower maximum LTV.

How much deposit is needed for a buy-to-let mortgage?
Typically 20% to 40% of the purchase price or valuation, depending on the lender, the property and the borrower. A larger deposit usually means more lenders to choose from.

How much can you borrow on a buy-to-let mortgage?
It depends on the lender’s maximum LTV, a rental stress test and whether the property type is acceptable. The rent must cover the mortgage payment by a set margin, calculated at a stressed interest rate.

What is an ICR?
The interest cover ratio (ICR) is how much the monthly rent must exceed the mortgage payment, shown as a percentage. An ICR of 125% means at least £125 of rent for every £100 of mortgage payment, with the payment worked out at the lender’s stress rate rather than the actual rate. The required ICR varies by lender, tax status, ownership structure, product term and property type.

Are buy-to-let mortgages interest only?
Most are. The monthly payment covers only the interest, and the loan balance is due in full at the end of the term, so a credible repayment plan matters as much as passing the stress test at the outset.

Is it better to buy a buy-to-let through a limited company?
It depends on the landlord’s tax position. Limited companies can still treat mortgage interest as a business cost, which often suits higher-rate taxpayers, but company lending can carry higher rates, and profit is taxed again on the way out to the individual. Tax advice is essential before deciding.

Can a first-time landlord buy an HMO?
Many lenders require previous landlord experience for HMOs. Some offer specific products for first-time landlords buying smaller HMOs or MUFBs, usually with lower LTV and loan size limits.

What is a portfolio landlord?
A landlord with four or more mortgaged buy-to-let properties. Lenders assess their whole portfolio, not just the new property, when deciding whether to lend.

Can a buy-to-let valuation be done without a physical visit?
Yes, on some properties. Many lenders offer an automated valuation model (AVM) on eligible standard properties, which values the property from data instead of a surveyor’s visit. This removes the wait to book an inspection, so the case can reach offer sooner. New builds, self builds, HMOs, MUFBs and holiday lets usually still need a physical valuation.

What are the main risks of buy-to-let?
The main risks are gaps between tenants, higher payments when a fixed rate ends, the loan balance falling due at the end of an interest-only term, falling property values, rent arrears, and changes to tax and regulation that reduce returns over time.

What is a let-to-buy mortgage?
Let-to-buy means letting out a current home and buying a new one to live in. It usually involves a buy-to-let mortgage on the former home and a residential mortgage on the new one.

Get the basics right, then match the lender

Most buy-to-let cases turn on the same few questions: whether the rent passes the stress test, whether the lender accepts the client and the property, and whether the landlord has a plan for the risks. Settle those early and the right lender is much easier to find. Buy to let is all we do. If you want to talk through a case, speak to your local BDM.

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Last updated 22 September 2026.