Buy-to-let mortgages are assessed differently from residential ones. The deposit requirements, the affordability checks, and the tax treatment all work differently, and getting this right from the start makes a real difference to how the investment performs.
Whether it’s your first rental purchase or an addition to an existing portfolio, we start with the numbers, the property, and how you’re planning to hold it.
Buy-to-let affordability is based mainly on expected rental income, not just your personal income, so we work out realistic borrowing before you commit to a property.
Standard buy-to-let, HMO, holiday let, and limited company purchases all need different lender appetites. We know who’s actively lending on each.
We’d rather tell you a property won’t stack up before you exchange contracts than after. Our advisers will run the real affordability numbers with you, not just the ones that make a sale look easy.
There are around 2.3 million landlords in the UK, and private rented homes make up a significant share of the housing stock, according to MHCLG English Housing Survey data. Buy-to-let remains a mainstream form of property investment, though the rules around it have tightened considerably over the past decade.
Since the phased introduction of Section 24, landlords who own property personally can no longer deduct mortgage interest from rental income before calculating tax, receiving a basic-rate tax credit instead. This change, from HMRC guidance on Section 24, has pushed a growing number of landlords towards buying through a limited company, where mortgage interest remains a deductible business expense.
Additional property purchases, including most buy-to-let purchases, also carry a 5% Stamp Duty Land Tax surcharge on top of standard rates, per Gov.uk Stamp Duty guidance, which is worth factoring into your purchase costs from the outset.
Rather than assessing affordability mainly on your personal income, buy-to-let lenders use an Interest Coverage Ratio, checking that expected rental income covers the mortgage payment by a set margin, commonly around 125% to 145% depending on your tax position and the lender. This is why the property’s rental potential matters as much as your own finances.
| Structure | Typical Deposit | Best Suited To |
|---|---|---|
| Standard Buy to Let | Often 25% or more | A single rental property, straightforward letting |
| Limited Company Buy to Let | Often 25% to 35% | Landlords wanting to retain mortgage interest tax relief |
| HMO | Often 25% to 35% | Multiple unrelated tenants, higher rental income per property |
| Holiday Let | Often 25% to 35% | Short term lets, seasonal rental income |
Rental yield, the annual rent as a percentage of the property’s value, varies significantly across the UK, and it’s one of the first things worth checking before buying. Northern cities and parts of Scotland have historically offered stronger yields than London and the South East, where higher property prices weigh yields down even when rents are also higher. We’ll help you look at the actual numbers for any property you’re considering, rather than relying on regional averages alone.
A landlord with four personally owned rental properties was increasingly affected by the loss of mortgage interest relief under Section 24, pushing them into a higher effective tax rate on rental profits. We talked through the costs and implications of incorporating, including the Stamp Duty and Capital Gains Tax considerations of transferring properties, and arranged limited company buy-to-let mortgages for two new purchases going forward, while they took separate tax advice on the existing portfolio.
An investor wanted to convert a large terraced house into a five-bedroom HMO to maximise rental income, aware that standard buy-to-let mortgages don’t typically extend to this type of letting. We arranged specialist HMO finance and talked through the additional licensing requirements from the local council, so the property was fully compliant before the first tenant moved in.
Most lenders ask for at least 25% of the property’s value, though this varies by lender, property type, and your tax position. Limited company purchases sometimes require slightly higher deposits.
It’s the test lenders use to check that expected rental income covers the mortgage payment by a set margin, commonly 125% to 145%. If a property doesn’t meet this threshold at the loan amount you want, you may need a larger deposit or a different lender.
It depends on your tax position, how many properties you hold, and your long-term plans. Higher-rate taxpayers with multiple properties often benefit from a limited company structure, but it isn’t right for everyone. We’d recommend speaking to an accountant alongside your mortgage adviser before deciding.
Yes. Standard buy-to-let mortgages typically don’t cover houses in multiple occupation. You’ll need a specific HMO mortgage, and the property will usually also need an HMO licence from the local council.
In almost all cases, yes. Additional property purchases carry a 5% Stamp Duty surcharge on top of standard rates, which is worth building into your overall purchase costs from the start.
Whether it’s your first rental purchase or your tenth, a proper conversation about the numbers is the best place to start.
