What is a buy to let mortgage?

A buy to let mortgage is a type of property finance designed for either businesses or individuals who want to purchase residential property for the purpose of renting it out to tenants. Buy to let mortgages will have different terms and interest rates compared to residential mortgages. It’s important to remember that you won’t be able to get a buy to let mortgage if you plan to live in the property yourself as your main residence.     

How does a buy to let mortgage work?

The process of getting a buy to let mortgage works in a similar way to a residential mortgage, however there are a couple of key differences, such as the deposit and documents required.

Here’s an outline of a buy to let mortgage works: 

  1. The borrower has a deposit of at least 25% of the property’s purchase price. 
  2. They secure a loan from a lender that will cover the rest of the cost of the property to purchase it. 
  3. The borrower purchases the property, which is then let out to tenants. 
  4. The rental income generated from tenants is used to cover the mortgage repayments and any expenses associated with the property. Any additional income will be profit for the landlord. 

What are buy to let mortgage rates?

The rates you can access on a buy to let mortgage will depend on a number of factors including: 

  • How creditworthy you are. This could be assessed either through your personal or business credit score, depending on whether you apply through a business or not. 
  • How much of a deposit you have - typically funders require a minimum of 25%, although this amount may vary depending on product and lender.
  • Current market conditions, e.g. what the Bank of England’s base rate is 

A buy to let mortgage will typically have a higher interest rate compared to a residential mortgage. This reflects the increased risk associated with investment properties.

Who is eligible for a buy to let mortgage?

The eligibility criteria for a buy to let mortgage can differ depending on which lenders you apply to. For example, high street banks tend to have stricter criteria than more specialised alternative lenders. 

Typically, if you’re looking for a buy to let mortgage, you’ll need to meet the following criteria: 

  • At least a 25% deposit 
  • A stable income, this could be either business income or your personal income, depending on how you apply 

try our free loan calculator

See how much you could afford to borrow

Buy to let mortgage calculator

How to get a buy to let mortgage

  • See how much you could afford to borrow using the buy to let mortgage calculator 
  • Find a property within your budget, it’s important that you research details such as will the property be attractive to tenants? How much rental income does the property generate currently, or historically? 
  • Check your eligibility for a buy to let mortgage using your capitalise account 
  • Search for funding from our panel of lenders 
  • Speak with a funding specialist who will help put your application together and choose lenders most suited to your requirements 
  • Upload your documents and apply to up to 4 lenders in one application
  • You will need to instruct solicitors and get a survey on the property 
  • Once all the lenders requirements are met, you will have an exchange and completion date agreed. 

Buy to let mortgage comparison

The Capitalise platform connects you with 100+ UK business lenders and allows you to apply to multiple with just one application. This means you can compare your buy to let mortgage offers to find an option that works best for you. 

Frequently asked questions about business loans

Buy to let mortgages typically have terms ranging from 5 to 20 years. The exact length of the mortgage will depend on what the lender offers and what you choose to opt for. When you’re considering a term length, bear in mind that shorter-term mortgages may have higher monthly payments but result in lower overall interest costs, while longer-term mortgages can offer lower monthly payments but higher overall interest costs.

Generally, buy to let mortgages tend to have lower interest rates and fees compared to commercial mortgages. This is because buy to let mortgages are secured against residential property, which is considered less risky by lenders compared to commercial properties. Additionally, buy to let mortgages often come with longer loan terms, which can further reduce monthly repayments. However, the specific costs and terms can vary. 

A let to buy mortgage is a type of loan secured against a property that will be let out to tenants to generate income. A let to buy mortgage cannot be used to purchase a property that the borrower intends to live in.