How to find the best buy-to-let mortgage

Kate Berrisford
August 22, 2022

If you’ve found a property to buy and you need finance to make that purchase, then you’re probably wondering how to find the best buy to let mortgage and mortgage provider.

The first step in finding a buy-to-let mortgage is to check your eligibility. If you qualify, you’ll want to look at a range of lenders and see what buy to let mortgage deals they offer. It's important to recognise that this type of mortgage loan is different from a residential mortgage.

Next, it’s important to accurately compare deals and figure out which ones may be best given your particular needs and circumstances. A professional and registered mortgage broker may be able to give you invaluable advice in this regard. It’s important that you carefully assess the pros and cons of a buy to let (BTL) mortgage, and take cognisance of all the fees and costs involved in buying a buy-to-let property.

Our complete guide to buy-to-let mortgages below gives you a comprehensive overview of all of these factors and considerations.

Aerial view of UK houses and potential rental properties

The growth in buy-to-let investments in the UK: a case for buy-to-let mortgages

Buy to let property investment is increasingly popular in the UK, as there is an abundance and growing number of tenants. According to Statistica, a significant proportion of the UK population rent instead of owning their homes. This represents around a third of all UK households, who are either private or social renters.

UK housing prices have been growing steadily, providing an opportunity to make a good return on investment for buy-to-let property investors. The growth in the buy-to-let market in the UK means more people may be interested in financing that investment with a buy-to-let mortgage. 

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What is a buy-to-let property?

A buy-to-let investment property is one that is bought with the intention of letting it out, or renting it to tenants. Buy-to-let properties can be bought by individuals or by companies, and are often seen as investment opportunities. 

While most buy-to-lets are residential houses or flats, they can encompass houses in multiple occupation (HMOs), student accommodation or other types of properties for renting.

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What is a buy-to-let mortgage?

Unless you have the cash to pay for your buy to let investment in full, you will need to borrow some of the money you need in the form of a buy-to-let mortgage. 

A buy-to-let loan or mortgage is a legal contract where you, the purchaser, agree to borrow money from a lender - and agree on how you will repay that loan amount.

To meet your monthly payments, you'll need to show your property will yield sufficient rental income to cover the repayment mortgage amount. That's in part how a buy to let mortgage loan is different from residential mortgages.

There are different types of mortgage lenders (which we look at below). Lenders typically require you to pay either a variable or fixed rate of interest on the loan amount, but there are other types of mortgage arrangements too. 

There are eligibility criteria that you’ll need to meet, as a first step in getting a buy-to-let loan or mortgage. Part of this qualification process will establish how much of a deposit will be required (which you’ll need to put down) and how much you’ll be able to borrow.

mortgage UK

Where can I find the best buy-to-let mortgage in the UK?

If you are keen to get a buy-to-let mortgage in the UK, it can be a daunting task figuring out where to start looking. Comparing options can be challenging if you don’t know what you’re looking for or how to compare accurately. 

There are also some nuanced differences between the types of mortgages that you may be eligible for and that’s why many people choose to get professional advice from a licensed mortgage advisor.

Potential buy to let property UK

To get started with your research into finding the best buy-to let loan or mortgage, we’ve summarised some options for you to consider:

  1. Buy-to-let mortgages from banks

The majority of large banks in the UK offer buy-to-let mortgages. 

Most of these banks provide information on their websites about the types of buy-to-let mortgage options they offer. Many have a useful buy-to-let mortgage calculator on their sites which you can use to get an idea of how much you’d be eligible to borrow, and to assess your general eligibility. 

Generally, the better your credit rating and bigger your deposit, the more favourable the lending rates will be.

Some examples of UK banks that offer buy-to-let mortgages include:
  • Barclays Bank’s buy-to-let mortgages

Currently Barclays buy to let mortgage deals are available if you’re at least 21 years old and wanting to borrow under £2 million. As the sole applicant, you'll need to earn more than £25,000 a year if you plan to borrow up to £1 million. That annual salary amount increases to £75,000 a year if you want to borrow more than £1 million. 

They offer a range of tracker and fixed rate BTL mortgages, with exclusive rates for existing bank mortgage holders. In addition they offer premier landlord mortgage and professional landlord mortgage rates.

  • TSB’s buy-to-let mortgages

Currently, the TSB buy to let deals are available for people over 25 years of age who earn a minimum of £25,000 per annum. 

You can borrow from between £25,005 up to £1 million and take out up to three of their BTL mortgages, totalling £2 million altogether. They offer a 2year fixed rate deal, a 2-year tracker deal and a 5-year fixed rate deal. 

Importantly, TSB’s BTL mortgages are not available to first time buyers.

  • HSBC’s buy-to-let mortgages

Currently HSBC’s buy to let deals include a range of fixed and tracker mortgages for UK residents who earn at least £25,000 a year. 

To be eligible, you need to have owned and lived in your house for at least 6 months. In other words, if you’re a first time buyer, you won’t qualify for one of their BTL mortgages. 

In addition, you can’t be a portfolio landlord (i.e. you can’t have 4 or more BTL mortgaged properties). And the mortgage can’t be for a HMO, such as a shared student house. 

If however, you’re looking for a BTL mortgage as a non-UK resident, they do have some separate rate offerings.

  • NatWest’s buy-to-let mortgages

If you’re looking for a NatWest buy to let deal, then you’ll need to be a UK resident and older than 18 years (but not older than 80). 

You’ll be required to put down at least a 25% deposit (more for new builds). And the rental income you plan to get must be at least 125% of your monthly interest payments. 

Furthermore, at minimum you’ll need to borrow £25,000 over a minimum of 3 years.

As with HSBC’s buy to let mortgage, you won’t qualify if the mortgage is for a property that will be rented out as a HMO. That extends to bedsits, rentals to related persons and properties that will be used as holiday lets.

NatWest offers both capital and interest and interest-only BTL mortgages.

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  1. Getting a Buy-to-let mortgage from a building society

In addition to banks, there are a wide range of UK building societies that offer buy to let mortgages. 

Building societies are cooperative financial institutions owned by their members, with very similar service offerings to banks. 

Examples of UK building societies include: 

  • Nationwide Building Society; 
  • Coventry Building Society;
  • Yorkshire Building Society; and 
  • Skipton Building Society. 

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  1. Specialist buy-to-let mortgage lenders

In addition to banks and building societies, there are a range of specialist buy to let loan or mortgage lenders in the UK. Some specialise in houses of multiple occupancy (HMO) buy-to-let mortgages, others in limited company BTL deals, or in holiday let BTL mortgages. 

Many of these specialist brokers will not be tied to specific lenders and their deals, providing access to a wide range of mortgage opportunities.

As with any lender and mortgage advisor, make sure that you chat with qualified, experienced and registered professionals. 

Property for rent

How to choose between different buy-to-let mortgage options?

Once you’ve had a look at the different BTL mortgages that are available, you’ll want to make a decision about which one is best for you.

Choosing between different buy to let mortgages can be a tricky and confusing process. To help make the decision, you can do your own research, discuss your options and get advice from a registered mortgage broker, and use a range of online buy-to-let comparison tools.

While you may be tempted to only look at the rates or terms associated with different options, there are other important factors worth considering. That’s where professional advice can be invaluable. 

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Do your own research

It’s important to do thorough research when finding a buy to let loan or mortgage. After all, you want to ensure that you choose a reputable lender and the most suitable options given your specific circumstances and needs. 

The implications of choosing an unsuitable mortgage or disreputable lender can be significant and long-term. 

Mortgage broker/advisor

Many people turn to a mortgage advisor who can provide insights and advice about buy to let mortgage options, lenders and the most suitable options given your needs and circumstances. 

Make sure that your mortgage broker or advisor is registered with the Financial Conduct Authority (FCA) on their financial services register. 

Check whether they provide whole-of-market advice or whether they only work with a limited range of mortgage lenders and their associated deals. 

Use a buy-to-let comparison tool

Making use of online buy-to-let mortgage comparison tools is another way to help you choose between the various options available. 

It’s a good idea to use several of these comparison tools, as they may yield different results. And make sure that you are comparing the same type of mortgage. 

Here are some examples of online buy to let comparison tools:

Other things to consider when choosing between buy-to-let mortgage options

In addition to looking at the different types of BTL mortgages that are on offer and their rates, it’s a good idea to consider some other factors too.

For example, check whether there are any early repayment fees, or if you are able to make overpayments. Look at the overall fees involved in the mortgage - as these can sometimes outweigh the advantages of a lower repayment rate. Fees may be charged as a set fee, or as a percentage of the loan. 

The duration of the loan offered and the deposit amount will both be important factors when comparing mortgage deals. 

How much of a mortgage can I get if I’m purchasing a buy-to-rent property?

This is of course a very popular question when it comes to buying to let properties. The answer is somewhat complex, as it depends on a range of factors which will be different for everyone.

There are a variety of factors that lenders will consider when deciding how much you can borrow. That includes the value of the property you’re planning to buy, the expected rental yield, your income and personal circumstances. 

A good starting point to figure out how much of a mortgage you might get, is to estimate the rent you’re likely to receive. To do this, you can start by finding out what the average rentals in the area are for the house that you want to buy. Local estate agents can be helpful in giving you this information. 

Pivro’s property market analysis platform can assist in this regard, by providing real-time, area-specific data about average rentals in any area of the UK. 

After you’ve worked out what rental you might get, you’ll need to calculate your expected rental yield (after all the costs have been deducted). There are some helpful buy-to-let rental yield calculators online that can help you create a rough estimate. 

Your rental income will usually need to be at least 125% of your monthly mortgage repayment amount, to be eligible for a buy to let loan or mortgage. 

You can get borrowing estimates on most bank’s websites. And you can also ask your mortgage broker to help you calculate how much of a loan you might be eligible for.

house, keys, the door

How much of a deposit will I need to put down for a buy-to-let?

Each lender will have different requirements in terms of the minimum deposit required. As a general guide, it’s usually between 20 to 25% of the value of the property you intend to buy.

That being said, some lenders may allow as little as a 15% deposit, and some may require up to around 40%. 

It’s important to remember that the higher the deposit you are able to put down, the more favourable your mortgage rate will be (generally).

Counting money to see if you can afford mortgage fees and costs

What buy-to-let mortgage fees can I expect to pay?

There are a range of different fees that you may be expected to pay as part of taking out a buy to let loan or mortgage. These are additional to the amount you’ll be paying back to the lender each month in terms of your mortgage agreement. 

It’s important to consider these before you take out a mortgage, as they can be costly and can affect your ability to meet your financial obligations. 

Here are some of the fees related to a buy-to-let mortgage:

  • Mortgage advisor fees
  • Deeds release fee
  • Lender arrangement fee
  • Booking fees
  • Valuation fees for your property
  • Conveyancing fees
  • Legal fees
  • Early repayment fees
  • Mortgage exit/closure fees

purchase, house, house purchase

Am I eligible for a buy to let mortgage?

Unfortunately not everyone is eligible for a buy to let mortgage. And different lenders will have different eligibility criteria. 

It’s therefore important to look at each lender’s eligibility criteria individually. And if you don’t make the cut - consider looking at a different lender. 

In general, to be eligible for a buy-to-let mortgage, you’ll need to:

  • earn at least  £25,000 a year;
  • be between 18 and about 70 years;
  • have a good credit score;
  • sometimes you may be required to own your own home (with many first time buyers being excluded from BTL mortgages);
  • show that your expected rental income will be more than your mortgage repayments (typically at least 125%); and
  • have at least 25% of the property value to put down as a deposit.

It’s important to look at exclusions. These are generally related to what the purpose of the property is, such as a holiday home or HMO. Many lenders (particularly banks and building societies) won’t be prepared to offer a buy to let mortgage for holiday lets, HMOs or properties that will be rented to family. 

Some lenders will not provide BTL mortgages for unusual construction types such as thatched roofs.

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Can I get a buy to let mortgage for a limited company?

While this article is focused on getting a buy to let mortgage as a private individual, you can get a buy-to-let mortgage for a limited company. 

Understanding the different types of buy-to-let mortgages

Before deciding on a buy to let mortgage, you should have a good understanding of the different types of buy-to-let mortgages. 

Knowing how they are different, their financial implications and the pros and cons of each type of mortgage, can help you make a more informed decision about which type is best for you.

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These are the 3 main types of buy-to-let mortgages in the UK:

  1. Fixed rate mortgages 

A fixed rate mortgage is one that guarantees that your monthly mortgage payments will stay the same over a specified period. These types of mortgages are typically for either 2, 3 or 5 years - although you may find other lengths of time available. 

The vast majority of mortgages offered are ones with fixed rates. In general, the longer the fixed period mortgage you opt for, the more interest you’ll end up paying. 

With this type of mortgage it’s important that you consider what upfront fees you’ll be paying (such as the arrangement fee), and whether you’ll be allowed to make overpayments. You may be liable for early repayment charges (ERCs), which are typically charged as a percentage of the outstanding mortgage amount. 

When there’s uncertainty in the economy created by fluctuating interest rates, these fixed rate mortgages can be particularly attractive. 

  1. Variable rate mortgages

A variable rate mortgage is one that fluctuates as there are changes in interest rates. 

There are three types of variable rate mortgages: standard variable mortgages, tracker mortgages and discount variable mortgages. 

The 3 types of variable rate mortgages:

  • Standard variable mortgages

Standard variable mortgages have their rate set by the lender, which can change at any given time. 

  • Tracker mortgages

Tracker mortgages have their rate set in line with the Bank of England’s base rate. If interest rates go up or down, your monthly mortgage repayments will fluctuate in line with those base rate changes. 

Bear in mind there may be some ‘collar’ minimum repayment rates included in tracker deals, which means that even if interest rates drop, your repayments may not drop below a certain threshold. 

Sometimes (although quite rarely) there are tracker mortgages with ‘caps’ that set maximum interest rates. 

  • Discount variable mortgages

Discount variable mortgages provide discounts on a lender’s variable rate for a specified amount of time. The interest rate for these mortgages are usually set below the lender’s standard variable rate (SVR) for the term of the mortgage, or a defined period. 

This type of variable mortgage allows the lender to increase or decrease the rate at any time. When interest rates are low, this type of mortgage can often be quite affordable. But these mortgages can include a ‘collar’ minimum repayment amount; and most have no ‘cap’ and therefore no maximum rate limits. 

  1. Buy-to-let remortgages 

Essentially a buy to let remortgage is a deal whereby you change your property mortgage to a new one. 

That could involve switching to a new lender, or staying with your current lender and changing your mortgage deal. 

There are various reasons why property owners choose to remortgage their BTLs. One such reason is to free up some cash. Another is to change mortgages because of more attractive deals being available.

house, mortgage, home

The pros and cons of a buy to let mortgage

While you may be so enticed by a particular investment property that you dive straight into buying it, it’s prudent to first consider the pros and cons of a buy to let mortgage.

Pros of a buy-to-let mortgage

  • If you don’t have enough money to buy a property, then taking a buy to let mortgage and paying it off with your rental yield may enable you to purchase it;
  • The rental housing market is growing, which means you should be able to find a suitable tenant;
  • Rental prices usually increase with inflation;
  • Investing in a property can, over time, provide a source of financial growth if the housing market and property rates grow;
  • If you can’t afford to buy a property and pay off a mortgage, renting it out to tenants who cover the mortgage repayments and more, can give you access to some additional income;
  • You may be able to claim some expenses related to managing your BTL property against the tax you owe;
  • You may be able to make some additions or home improvements which increase your rental yield and the overall property value over time.

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Cons of a buy-to-let mortgage

  • Borrowing requirements for a BTL mortgage may be more strict than a regular home mortgage, which may make you ineligible;
  • Generally, you’ll need to have at least 25% of the property’s value as a deposit to put down;
  • By putting down a deposit and owing mortgage repayments, your money may be tied up for a long period of time;
  • You may struggle to find a suitable tenant and you may not manage to get the rental income you expected;
  • If you’re counting on your investment property rising in value over time, and there are property market drops - you may not make the profits you were expecting to (or could even lose value);
  • You may have to pay for an expensive repair, maintenance work or upgrades to comply with changing legislation;
  • If your plan is to sell the property at the end of the mortgage to make your capital repayment amount (particularly if you’ve taken out an interest-only mortgage), and the property market crashes - you could find yourself in a precarious situation of not having enough to pay off the loan;
  • You may encounter gaps in tenancy, or tenants who don’t pay on time (or at all), which can affect your ability to meet your monthly loan repayments;
  • When you add the costs of managing a property (such as insurance, maintenance, stamp duty etc.) to the costs of your mortgage, you may need to pay in from your personal income to meet the monthly repayment amounts;
  • It can be a time-consuming and tricky business managing tenants and ensuring all the paperwork and legal requirements are met if you plan to do it yourself;
  • When you sell your BTL property, you may be liable for capital gains tax if you make a profit.

How to find a suitable buy-to-let investment property?

Before you arrange a BTL mortgage, you presumably would have spent time finding the best buy to let area and an attractive investment property to buy. 

If you’re just starting out looking for a suitable buy-to-let investment property, then Pivro offers a powerful tool for helping you find the perfect property investment. 

By harnessing the power of Big Data, AI, and VR, Pivro’s property marketing automation and property investment analysis platform can help you identify the best property deals from across the United Kingdom. 

Providing instant access to real-time, integrated property data including area statistics and BTL investment yield calculations, Pivro provides an exclusive membership platform to search property investment data, uncover trending property insights, and make use of powerful data analysis tools. 

This can help you save time and money as you search for your ideal UK investment property.

Contact Pivro

To learn more, contact Pivro and speak with a marketing automation for property professionals expert who can answer any questions you might have.

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