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A Guide to Buy To Let Mortgages
A Buy to Let (BTL) mortgage is for anyone who wants to purchase property to rent it out. You must ensure you understand the risks of investing in property before you consider looking to let a property out.
It is important to have a good credit record. There is also a limit on how old you can be to obtain this type of mortgage. Lenders have upper age limits, typically between 70 and 75.
How do Buy to Let Mortgages work?
Buy to Let Mortgages are similar to standard residential mortgages but there are a few differences:
- Interest rates tend to be higher
- Fees are typically higher
- The minimum deposit is larger, usually 25% of the property’s value
- Most Buy to Let mortgages are interest-only, this means that you will only be paying off the interest each month rather than the original loan amount. The amount borrowed will be due at the end of the mortgage term
- Most Buy to Let mortgage lending is not regulated by the Financial Conduct Authority (FCA).
How much can you borrow?
The amount that you can borrow will depend upon how much rental income you expect to receive. Lenders will typically need rental income to be 25-30% higher than your mortgage payment.
You will also need to ensure you have good credit as this will affect the amount you can borrow too.
Don’t rely on your rental
You need to make sure you understand that there will be times you will have a vacant property. This means that you will have no rent coming in but mortgage repayments still to make. You must make sure you have a capital cushion prepared for times this till inevitably happen.
You cannot assume that you will be able to sell the rental property in order to pay off the mortgage. Property prices are changing all of the time and equity can fall into the negative quicker than you would think.
It would be a gamble to rely on your rental and could cause you problems with your own home. If you miss payments on your Buy to Let mortgage it could affect your personal residential property.
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Tax Implications
We do not advice on Taxation.
Capital Gains Tax
If you are a basic-rate taxpayer, Capital Gains Tax (CGT) is charged at 18%; if you are a higher- or additional-rate taxpayer, it is charged at 24%. If you sell a buy-to-let (or other second) property at a profit, you will generally pay CGT — but only on the gain above the annual allowance, which for 2025/26 is £3,000.
You can reduce your CGT bill by deducting allowable expenses (e.g. solicitor and estate-agent fees, costs of removing or refurbishing furniture, improvements, etc.). Any net gain must be declared in your tax return (or via the 60-day UK property sale form, where applicable).
Income Tax
If you receive rent from any property, that rent (after allowable expenses) is subject to income tax. You must declare it on your Self-Assessment tax return for the tax year in which it was earned.
The tax on your rental income depends on your total taxable income (salary + rental profit + other income), and is charged at the same rates as your other earnings: 20% if you are a basic-rate taxpayer, 40% if you are a higher-rate taxpayer, or 45% if you are in the additional-rate band.
You can offset — i.e. deduct — certain “allowable expenses” from your rental income before calculating the taxable profit. These include, for example, letting- or estate-agent fees, insurance, maintenance and repairs (but not capital improvements), and council tax or utility bills only if you (the landlord) pay them
How a Mortgage Broker can help?
A Choice Mortgage Broker understands every aspect of the mortgage market and keeps up to date with its ever changing nature. It is important to know the current market especially if you are looking to invest in property. Mortgage Brokers can ensure you are accessing the right mortgage deals for you.
Most Buy-to-Let Mortgages are not regulated by the Financial Conduct Authority so it is even more important to make sure that you are getting everything that you should be and that it is all legitimate. A Mortgage Broker can help with the paperwork and ensure that you understand what you are committing to.
A Mortgage Broker can offer one to one personal advice which is catered to you. They will take into account all of the values, budgets, costs and needs that you have in mind and clear the way to the right mortgage for you.
The FCA does not regulate agents, solicitors, tax and some forms of Buy to Let mortgage services.
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