How buy-to-let mortgages differ
Residential mortgages are assessed mainly on your personal income — how much you earn, your outgoings, your credit history. Buy-to-let mortgages are assessed primarily on the property's rental income — lenders want to see that the rent comfortably covers the mortgage payment, with a margin to spare, regardless of your personal salary.
Deposits are typically higher too — often a minimum of 20–25%, compared to 5–10% for many residential purchases — and buy-to-let rates tend to run a little higher than equivalent residential ones, reflecting the different risk profile lenders assign to rental property.
How lenders assess rental income
Most lenders use a 'stress test': they check the rent would still comfortably cover the mortgage payment even at a higher notional interest rate than you're actually being charged, often with a required coverage of around 125–145% of the payment. This protects against future rate rises and periods when the property sits empty.
Our buy-to-let calculator gives you a rough sense of whether a property's rent is likely to clear a typical stress test before you get too far into a purchase, using the coverage ratio and stress rate a lender might apply.
The stress test — not the actual rate you'll pay — is usually what determines your maximum loan on a buy-to-let purchase. A property with borderline rental yield can fail the test even if the numbers look fine at your actual rate.
Personal name vs limited company
You can buy a rental property in your personal name or through a limited company (often a Special Purpose Vehicle, or SPV, set up specifically to hold property), and the right choice depends heavily on your tax position, how many properties you plan to hold, and your income from other sources.
This is genuinely worth a conversation with an accountant alongside your mortgage advice — the right structure depends on your wider tax position, not just the mortgage itself. We're happy to talk through the mortgage side of both.
Personal name
Simpler to set up and often a wider choice of lenders and products, but rental income is taxed as personal income and mortgage interest relief for individuals has changed in recent years.
Limited company (SPV)
Rental profits are taxed at corporation tax rates rather than personal income tax, and full mortgage interest can typically still be offset against profits — but the mortgage market is smaller and rates can run a little higher.
Tax considerations
Rental income is taxable, and the rules around mortgage interest relief for individual landlords have changed significantly compared to how they used to work — this is one of the main reasons limited company ownership has become more common. We're not tax advisers, so we won't give you specific tax advice, but we'll always flag where it's worth getting a proper conversation with an accountant before you commit to a structure.
Growing a portfolio
Once you own four or more mortgaged buy-to-let properties, you're typically classed as a 'portfolio landlord', and lenders assess your entire portfolio's finances — rental income, mortgage balances and overall exposure — not just the property you're buying. It's worth planning ahead for this if you intend to build up multiple properties over time, since not every lender is comfortable lending to portfolio landlords, and the paperwork requirements step up accordingly.
First-time landlords
If this is your first rental property, some lenders require you to already own your own home (rather than being a first-time buyer generally), and a few products are specifically restricted to landlords with existing rental experience. It's not universal, but it's worth knowing about before you get your heart set on a particular product.
Beyond the mortgage itself, it's worth budgeting for the practical realities of being a landlord early — letting agent fees if you're not managing the property yourself, gas safety and electrical certificates, and a cash buffer for maintenance and void periods when the property sits empty between tenants.
