How lenders assess buy to let
The core test is rental cover: the expected monthly rent must exceed the mortgage interest by a set margin, calculated at a stressed rate rather than the actual pay rate. Most lenders want rent comfortably above the stressed interest figure, with tougher margins for higher-rate taxpayers.
- Rental income - evidenced by a letting agent's assessment or existing tenancy agreements
- The stress test - rent measured against a notional higher interest rate, not just today's payment
- Your tax band - higher-rate taxpayers usually face stiffer rental cover requirements in personal names
- Personal income - many lenders set a minimum income floor and check you can absorb void periods
- Property type - standard lets, HMOs, flats above shops and holiday lets each have their own lender pools
- Your experience - first-time landlords are accepted by many lenders, with some extra conditions
Where the rent alone narrowly misses the cover test, some lenders allow top slicing - using surplus personal income to bridge the gap. Knowing who allows it is exactly the sort of criteria detail that decides these cases.
Deposits and interest only
Buy to let deposits are larger than residential ones - typically around 25% of the purchase price, with the widest choice of deals at that level and some lenders accepting less for strong cases.
Most landlords borrow interest only: the rent covers the interest and running costs, the capital is repaid when the property is eventually sold or refinanced, and the lower payment protects cash flow through voids and repairs. Repayment buy to let mortgages exist for landlords who prefer to clear the debt over the term.
How interest only works in general - including its costs over the term - is covered on our interest only mortgages page.
Limited company buy to let
Many landlords now buy through a limited company - usually a special purpose vehicle (SPV) set up to hold property. The mortgage market for company borrowing is well established but distinct: a different panel of lenders, personal guarantees from directors, and its own pricing.
- Interest treated differently for tax than in personal names - the usual driver for incorporating
- Rental cover tests are often gentler for company borrowers than for higher-rate taxpayers personally
- Personal guarantees from directors are standard
- Moving an existing personally-owned property into a company is a sale and purchase, not a simple transfer
Whether to buy personally or through a company is a tax question as much as a mortgage one - we arrange the lending either way and will tell you when it is a conversation for your accountant. Limited company buy to let counts as specialist lending for our fee, set out below.
First-time and portfolio landlords
First-time landlords: plenty of lenders will lend on a first rental property. Most prefer you to own your own home already, though options exist for first-time buyers going straight to buy to let with a smaller lender pool and closer underwriting.
Portfolio landlords - four or more mortgaged rental properties - are underwritten across the whole portfolio: lenders review a schedule of every property, its rent, its borrowing and the overall gearing. Specialist portfolio lenders handle large books as a matter of routine, and structuring the next purchase so it strengthens rather than strains the portfolio is where advice earns its place.
Growing a portfolio usually means releasing equity from existing properties to fund the next deposit - that route is covered on our buy to let remortgage page.
Costs and fees
- Deposit - typically around 25% of the purchase price
- Lender arrangement fees - common on BTL deals, sometimes charged as a percentage of the loan
- Valuation and legal work - with a stamp duty surcharge applying to additional properties
- Our broker fee - typically £1,250, or up to £1,495 for specialist lending such as limited company buy to let
Your exact fee is confirmed with you in writing before you commit to anything - full details are in our regulatory statement.
Why use LifePro?
- Whole-of-market, independent mortgage brokers covering all of the UK
- Personal name, limited company, HMO and portfolio lending arranged
- We know the stress tests, top-slicing rules and lender appetites case by case
- CeMAP qualified advisers with 20+ years' experience
- Free valuation and legal fees when you remortgage an existing buy to let
Most buy to let lending is not regulated by the Financial Conduct Authority; where a property is let to close family members, regulated buy to let rules apply instead - your adviser will confirm which side your case falls on.
