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How much deposit do I need for a buy-to-let mortgage

Jan 23, 2024
How much deposit do I need for a buy-to-let mortgage
Looking to buy a property to rent out? Buy-to-let mortgages are the way to go. Learn how much deposit you need, what lenders assess, and how this may affect your mortgage rate in this comprehensive guide.

What is a buy-to-let mortgage?

A buy-to-let mortgage  (BTL) is ideal for people who want to buy a property to rent out rather than to live in. They’re most suitable for investors or landlords looking to widen their portfolio.  
It’s important to know that buy-to-let mortgages are interest-only, meaning you’ll pay interest on your mortgage instead of the full loan amount. 

What is the minimum deposit for a buy-to-let mortgage?

Buy-to-let mortgages typically require a higher deposit than residential mortgages, between 20% and 25%. Lenders see them as a higher risk since you’ll rely on your rental income to repay it. 

Can I get a buy-to-let mortgage with a low deposit?

Getting a buy-to-let mortgage with less than a 20% deposit can be difficult, but it’s not impossible. Ensure you meet the following eligibility criteria:
  • Your rental yield* is between 5 and8%
  • You have an income of at least £25,000 a year 
  • You are over 21 years old 
  • You have a good credit score
*The rental yield is the financial return on your rental property. It’s calculated by dividing your annual rental income by the property’s value.
Consider contacting a mortgage broker to help you secure the best deal. 

What types of deposits will lenders accept?

Your buy-to-let mortgage can come from various sources, provided you show proof. These include:
  • Personal savings
  • Inheritance
  • Selling another property
  • Mortgaging another property
  • Loan from family

How will my deposit affect my mortgage rate? 

As a rule of thumb, the larger your deposit, the better the mortgage rate and the lower the interest rate. This is because fewer lenders are available if you have a small deposit, and those who are may see your application as riskier.
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