How much deposit do you need for a buy-to-let property?

Unless you’re a cash buyer then you’ll need to arrange a mortgage. And that means you’ll need a deposit.

A buy-to-let mortgage deposit is usually about 25 per cent of the property’s value – and typically higher than the five to 10 per cent deposit you need for a house you plan to live in.

Buy-to-let mortgage deposit example

Property purchase price = £285,000

25% deposit = £71,250

To secure this property as a buy-to-let, you’d also need to charge monthly rent at around 25-35 per cent more than your mortgage payments.

New-build properties are often treated as ‘riskier’ by lenders, and you may need a minimum of 35 per cent deposit on one of these.

Is interest-only or repayment best for buy-to-let?

You have two options with a buy-to-let mortgage: repayment or interest-only.

A buy-to-let interest-only mortgage means you’ll only pay off the interest each month, so you’ll take home a larger proportion of the rent from your tenants.

A repayment mortgage means you’ll be paying off the amount you owe, plus interest, over the time period agreed in your mortgage.

Both have their pros and cons, but many portfolio landlords choose interest-only mortgages to boost their rental profit. This just means you’ll need to pay off the outstanding balance at the end of your mortgage term.

This article is intended as a guide only. Please get advice from a banking and finance expert if you’re not sure of anything.

How to find the best buy-to-let mortgage rates

Make sure you get the best mortgage rate by following these tips:

• shop around – there are lots of comparison websites out there to help you find the right mortgage product for you

• speak to a mortgage broker – they can offer expert financial advice, help you find a deal that suits your financial circumstances, and often access more products

• choose between a fixed and a variable rate of interest – a fixed rate is usually for two, three or five years while a variable rate can go up and down

• check your credit score – and try to improve it if you need to

Who are the best buy-to-let mortgage providers?

When shopping around to find the best buy-to-let mortgage rates, you’ll come across a selection of providers.

Some buy-to-let mortgage providers are mainstream lenders while others specialise in BTL.

Here’s an overview of some of the BTL mortgage providers to look out for:

• West One – a specialist lender that offers portfolio lending up to £7.5 million with no minimum income requirements
• Halifax – one of the UK’s best-known lenders offers a range of two and five-year buy-to-let products
• Landbay – a buy-to-let-only lender that offers fixed and tracker buy-to-let mortgages for standard purchases as well as HMOs
• Barclays – a traditional lender that offers products for up to £2 million for each property
• Paragon – a specialist lender that borrowers can only access through an intermediary. It provides products for single properties, HMOs and limited companies
• Lloyds Bank – a traditional lender that offers a range of two and five year products with a maximum loan value of £1 million
• Aldermore – a specalist lender that allows borrowers to include multiple properties on one buy-to-let mortgage application
• The Mortgage Works – the buy-to-let arm of the Nationwide Building Society that offers deals up to 10 years with a maximum LTV of 80 per cent
• HSBC UK – a traditional lender that offers buy-to-let products up to 75 per cent LTV with a minimum deposit of 25 per cent