What are buy-to-let mortgages?

Harriet Meyer / 20 April 2015

What are buy-to-let mortgages and how do they differ from standard mortgages? Harriet Meyer describes the key characteristics of buy-to-let mortgages, so you know what to look out for when seeking the best deals.

If you’re buying a property to let out and can’t afford to buy outright, you’ll need a buy-to-let mortgage.

These mortgages work in the same way as standard mortgages, but with some key differences.

Get your finances in order before you apply for a mortgage by checking your credit report. Use our free 30-day trial which you can cancel at any time, with no obligation to buy*.

Here are some key characteristics of buy-to-let deals you should know about:

Higher rates

Rates are typically 1% to 1.5% higher than standard rates on fixed and tracker deals, as there is a greater risk to the lender.

This is because landlords typically rely on rent from tenants to meet mortgage costs, so if there are vacant or ‘void’ periods, there is a risk repayment won’t be met.

Did you know that your credit report can affect the interest rate you pay?


Buy-to-let mortgages are generally interest-only, so you’re not repaying the capital debt. While this means lower monthly payments, you’ll need to find a way to pay off the original loan at the end of the agreement.

Are you sitting on an interest-only mortgage time bomb?

Bigger deposits

Usually, you’ll have to put down a bigger deposit than you would have to with a standard mortgage, at around 25%. 

If you were buying a home to live in, you may be able to put down as little as 5%. Some lenders might want 20%, some 40%, so check the conditions for the deal carefully. However, the best deals will be at loan-to-values of 60% and below.

Did you know that it is sometimes harder for the over-50s to get a mortgage? Read more. 

Bigger fees

A best-buy buy-to-let deal may come with a hefty fee of as much as 2.5% of the loan, amounting to £2,500 on a £100,000 mortgage.

However, deals with higher interest rates will typically charge less. Make sure to check the total cost of a loan carefully, as some fees mean that opting for a higher interest rate  might be a better bet.

How much you can borrow

The level of rent you’ll receive is also taken into account when assessing how much you can borrow, alongside affordability. 

This income should typically amount to between 25% and 30% more than your monthly mortgage repayments.

How to become a landlord

Specialist providers

Most of the major banks and building societies offer buy-to-let mortgages, but a number of specialist lenders provide them too. Make sure to compare rates from all providers as they vary widely. Speaking to a broker should give you a wide choice of deals.

Lender conditions

There may be certain conditions included in the deal, such as not being able to let the property to groups of unconnected tenants, or the type and length of agreement you have with them. 

Make sure to read the fine print before signing up.


There are some tax advantages to buy-to-let deals. You can offset interest payments on your mortgage against tax on rental income, along with other expenses such as agents' fees and maintenance costs.

If you are planning to apply for a mortgage,  it is a good idea to check your credit report. Get free access to your credit report for 30 days with Experian*.

An increasing number of the over-50s are investing in rental property. Known as ‘grandlords’, they are turning to the rental and the buy-to-let markets to supplement their retirement income. For more information about becoming a landlord, download our free guide

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The opinions expressed are those of the author and are not held by Saga unless specifically stated.

The material is for general information only and does not constitute investment, tax, legal, medical or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.