What is a buy-to-let mortgage?
Buy-to-let mortgages have been around since the 1990s. They’re designed for landlords who want to buy a property to rent out to tenants.
Unlike a residential mortgage, how much you can borrow is based mainly on the rent the property is expected to bring in. Most lenders want the monthly rent to cover the mortgage payment comfortably, typically by 125% to 145%, calculated at a “stressed” interest rate higher than the one you’ll actually pay. Some lenders will also take your personal income into account, which can help if the rent alone falls a little short.
Buy-to-let mortgages usually come with higher fees and interest rates than residential mortgages. Many landlords choose interest-only repayment, which keeps monthly costs down because you only pay the interest, not the amount borrowed. The full loan still has to be repaid at the end of the term, which many landlords plan to do by selling the property.
What’s changed with stamp duty?
In her Budget on 30 October 2024, Chancellor Rachel Reeves raised the stamp duty surcharge on additional properties from 3% to 5%. The change took effect on 31 October 2024.
In practice, if you’re buying a buy-to-let or a second home, you’ll pay an extra 5% on top of the standard stamp duty rates. That applies to the whole purchase price, not just the portion above a threshold, so it’s worth factoring into your budget from the start.
How we can help
Buy-to-let can feel daunting at first, especially with the rules changing. With our experience and support, we’ll guide you through the process and help you find a mortgage that suits your plans.
There may be a fee for mortgage advice, the precise amount will depend on your circumstances but we estimate that it will be £395. We do not charge a fee for our services for New Build Homes; we receive commission from the provider.
