Buy-to-let (BTL) mortgages are assessed very differently from residential ones, largely because lenders base affordability primarily on the property's likely rental income rather than the landlord's personal salary. Understanding these rules is essential before investing in rental property.
How buy-to-let affordability is assessed
Rather than an income multiple based on your salary, lenders typically require the expected monthly rental income to cover your mortgage payment by a set margin — commonly requiring rent to be around 125–145% of the mortgage payment, calculated at a notional "stress test" interest rate, often higher than the actual rate you'll pay, to build in a safety margin.
Deposit requirements
Buy-to-let mortgages typically require a larger deposit than residential ones — commonly a minimum of 25%, and sometimes more for new landlords, non-standard properties (such as flats above commercial premises or ex-local authority housing), or higher-risk locations. Some specialist lenders will go as low as 20%, but rates and product choice tend to improve significantly above 25% and further at 35–40% deposit.
Personal income requirements
Most mainstream buy-to-let lenders still require the landlord to have a minimum personal income (often around £25,000/year) separate from the rental income, partly as a safeguard should the property sit empty between tenancies.
Interest-only vs repayment
Many landlords choose interest-only buy-to-let mortgages, where monthly payments cover only the interest and the capital is repaid at the end of the term (typically from selling the property or remortgaging). This keeps monthly costs lower, but it's essential to have a credible repayment strategy for the capital, which lenders will usually ask about during the application.
Tax rules landlords should understand
- Mortgage interest relief: Individual landlords can no longer deduct mortgage interest from rental income before calculating tax; instead, they receive a tax credit equivalent to basic-rate tax on the interest — a significant change from the old system that particularly affects higher-rate taxpayers.
- Section 24 impact: This restriction can push some landlords into a higher tax bracket on paper, even where actual cash profit is modest, so it's worth modelling carefully or discussing with an accountant.
- Capital Gains Tax: Selling a buy-to-let property typically triggers CGT on any gain, unlike a main residence, which usually benefits from Private Residence Relief.
- Additional Stamp Duty: Buy-to-let and second-home purchases attract an additional SDLT surcharge on top of standard rates — use our Stamp Duty calculator to estimate this.
Holding property personally vs through a limited company
An increasing number of landlords, particularly those with multiple properties or who are higher-rate taxpayers, purchase through a limited company structure, which can offer different tax treatment (corporation tax rather than personal income tax on profits, and full mortgage interest deductibility against company profits). This comes with its own costs and complexities — including generally higher mortgage rates for limited company buy-to-let lending, and the need for a corporate structure and accounting — so it's a decision that benefits from professional tax advice specific to your circumstances.
Other landlord responsibilities to budget for
- Landlord insurance (buildings, and often rent guarantee or legal cover)
- Gas Safety Certificates, Electrical Installation Condition Reports and Energy Performance Certificate requirements
- Deposit protection scheme registration for tenant deposits
- Letting agent fees, if not self-managing
- Void periods between tenancies, where you still owe the mortgage but have no rental income
For related reading, see our guides on Holiday Let Mortgages: A Guide for Investors and Offset Mortgages Explained: How They Work.
The bottom line
Buy-to-let mortgages hinge on rental income coverage rather than personal salary alone, require larger deposits, and sit within a distinct — and less favourable than it once was — tax framework. Prospective landlords should model the full picture, including tax, void periods and running costs, rather than focusing purely on whether the rent covers the mortgage payment.