Understanding Buy to Let Mortgages
Buy to let mortgages are specifically designed for properties you intend to rent out rather than live in. They work differently to residential mortgages, with lenders primarily assessing whether the rental income will cover the mortgage payments rather than focusing solely on your personal income. If you're a landlord looking to remortgage your BTL property, you could access better rates and potentially release equity for further investments.
BTL mortgage rates are typically 0.5-1% higher than residential rates, and most lenders require a minimum 25% deposit (75% LTV), though some specialist products are available at higher LTVs. The mortgage is usually arranged on an interest-only basis, keeping monthly payments lower and maximising rental yield.
Rental Coverage Calculations
Lenders use rental coverage ratios to assess BTL applications. Most require the expected rent to be 125-145% of the mortgage payment at a stress-tested interest rate (typically 5.5% or higher). For example, if your monthly mortgage payment would be £1,000, you'd need to demonstrate rental income of £1,250-£1,450 per month.
Higher-rate taxpayers often face stricter requirements, sometimes needing 145% rental coverage compared to 125% for basic-rate taxpayers. This is because Section 24 tax changes mean mortgage interest is no longer fully deductible against rental income for individual landlords, affecting their net profit.
Limited Company Buy to Let
Many landlords now purchase investment properties through limited companies (SPVs - Special Purpose Vehicles) due to tax advantages following Section 24 changes. Companies can still claim full mortgage interest relief, making this structure more tax-efficient for higher-rate taxpayers. Remortgaging existing personal BTL properties into a limited company is more complex and may trigger stamp duty charges.
Not all lenders offer limited company BTL mortgages, but the market has grown significantly. Rates for company BTLs are typically slightly higher than personal BTLs, but the tax savings often outweigh this cost. Our brokers can advise whether a limited company structure makes sense for your portfolio.
Portfolio Landlord Requirements
If you own four or more mortgaged buy to let properties, you're classified as a portfolio landlord. This triggers additional underwriting requirements under PRA (Prudential Regulation Authority) rules. Lenders will assess your entire property portfolio, including properties with other lenders, looking at overall exposure and risk.
Portfolio landlords need to provide more documentation, including a full portfolio schedule, property valuations, and evidence of experience in property management. Some lenders specialise in portfolio landlords and offer streamlined processes. Our brokers have access to these specialist lenders and can help navigate the additional requirements.
Compare Buy to Let Deals Today
Whether you're a first-time landlord, looking to expand your portfolio, or simply remortgaging to a better rate, our FCA-regulated brokers can help. We compare BTL deals from specialist lenders across the market, including options for limited companies and portfolio landlords. Complete our form for a free, no-obligation quote.