Buy-to-let mortgages
A mortgage on property let to tenants, assessed on whether the rent covers the payment under a stressed rate rather than on your personal income.
Two numbers do most of the work on a buy-to-let case: the rent, and the stress rate the lender tests it against. Once you understand how those two interact the rest of the process is refreshingly predictable — and there is usually more room to improve the outcome, through product choice and structure, than people expect.
The parameters
Where this product sits.
Ranges across the market, so you can sanity-check any quote — ours or anyone else’s — before you take it seriously.
- Maximum LTV
- 75–80%
- 80% exists but is thinly served and priced for it. Most competitive pricing sits at or below 75%.
- Interest cover
- 125–145%
- 125% for a basic-rate taxpayer or a limited company; 145% where the borrower is a higher-rate taxpayer.
- Stress rate
- 5.5% or pay + 2%
- Rent is tested against a rate well above the one you pay. Five-year fixes are commonly stressed at pay rate.
- Product fee
- 0–7%
- High-fee products buy a lower rate. On a two-year deal the fee usually outweighs the saving.
- Portfolio rules
- 4+ mortgaged BTLs
- At four or more, PRA rules require the whole portfolio to be assessed, not just the property being bought.
These are indicative market ranges rather than a quotation — they are here so you can sanity-check any offer you are shown. Your own terms will be priced on the asset, the borrowing entity, your trading history and the exit, and we will put real figures in front of you on the first call.
Typical cases
What it is used for.
Single self-contained units
The standard case, most competitive pricing and the widest lender choice. The rental figure comes from the valuer, not the letting agent, and it is often lower than you expect.
Limited company and SPV purchases
Now the majority of new buy-to-let lending, driven by how finance costs are relieved. Rates are marginally higher, interest cover is calculated at the company rate, and directors give personal guarantees.
HMOs and multi-unit freehold blocks
Higher yields, a smaller lender panel, and valuations that turn on licensing, room sizes and article 4 directions. Some lenders value on investment yield rather than bricks and mortar, which changes the loan considerably.
Portfolio refinance
Releasing equity across several properties, or moving a portfolio onto one lender. Assessed on aggregate cover across the whole portfolio, so a weak property can be carried by stronger ones.
In detail
How it works in practice.
The interest cover calculation, worked through
A lender takes the monthly rent, divides it by the monthly interest at their stress rate, and requires the result to clear their cover ratio. On a £200,000 loan stressed at 5.5%, monthly interest is about £917. At a 145% cover requirement, you need rent of roughly £1,330 a month.
If the property only achieves £1,150, the loan is cut back until it fits — here to about £173,000, whatever the property is worth. This is why cases fail on rent rather than on value, and why the rental figure on the valuation matters more than the purchase price.
Two things move the answer. A five-year fixed rate is commonly stressed at the pay rate rather than 5.5%, which can lift the loan by 20% or more on the same rent. And borrowing through a limited company is usually assessed at 125% rather than 145%, which is a large part of why most new landlord lending is now corporate.
Product fees, and the arithmetic worth doing
Buy-to-let products routinely carry fees of 3%, 5% or even 7%, added to the loan rather than paid up front, in exchange for a headline rate a long way below the market. On the monthly payment they look excellent.
Run the total. On a £200,000 loan, a 5% fee is £10,000 added to the debt, on which you then pay interest for the whole term. Over a two-year fix, a rate saving of 1% is £4,000 — so the high-fee product costs you £6,000 more, plus interest on the fee, and leaves your balance higher when you come to remortgage.
Over a five-year fix the arithmetic can genuinely favour the fee. The point is that it is arithmetic, not a preference, and it depends on the loan size and the term. We run both and show you the total cost over the fixed period rather than the monthly payment.
Portfolio landlords, and what changed
Once you hold four or more mortgaged buy-to-let properties you are a portfolio landlord under PRA rules, and every new application is assessed against the whole portfolio rather than just the property in question.
That means a portfolio spreadsheet, business plan, cash flow forecast, assets and liabilities statement, and evidence of aggregate rental cover — usually across all properties whether mortgaged or not. Lenders also apply a maximum overall portfolio LTV, commonly 65% to 75%.
The practical consequence is that one over-leveraged property can block a purchase on an otherwise strong portfolio. Getting the portfolio schedule in order before applying is most of the work, and it is worth doing once properly rather than reactively at every application.
Before you sign
Four things worth checking.
The valuer's rent, not the agent's
Lending is sized on the valuer's rental assessment. An optimistic agent's letter does not move it, and a low figure cuts the loan.
Early repayment charges
Typically 5% falling to 1% across a five-year fix. If you might sell or refurbish and refinance inside the period, that charge can wipe out the rate saving.
Top-slicing is not universal
Using personal income to cover a rental shortfall is allowed by some lenders and refused by others. It is a placement decision made before the application, not a fallback afterwards.
Licensing and article 4
On HMOs, an unlicensed property or one in an article 4 area can fail a valuation outright. Check both before you exchange.
It turns on tax, and it is a question for your accountant rather than your broker. Broadly, higher-rate taxpayers building a portfolio tend toward a limited company because finance costs are treated differently; a basic-rate taxpayer with one or two properties often does not.
What we can tell you is the funding difference: company lending is assessed at 125% cover rather than 145%, so it usually supports a larger loan, at a marginally higher rate, with directors' guarantees. Decide the structure before you offer — moving a property between structures later is a sale, with stamp duty and possibly capital gains tax attached.
Yes, with a smaller panel. Many lenders set a minimum personal income of £25,000; a number have no minimum at all and assess purely on rental cover.
Where you have no employment income, expect more scrutiny of how you meet voids and maintenance, and be ready to evidence reserves.
For a small HMO, most lenders value on comparable bricks-and-mortar — what the house would sell for as a house — which is often well below what you paid to convert it.
For larger licensed HMOs, some specialist lenders value on investment yield, capitalising the rental income. That can produce a materially higher figure and a materially larger loan. Which basis applies is a lender-selection decision, and it is the single biggest variable on an HMO case.
Yes, and it is the standard exit. The one thing to check first is the lender's ownership requirement — many will not remortgage a property owned for less than six months, and those that will may lend against the purchase price rather than the new value.
Where a refurbishment has genuinely added value, lenders who will lend against the improved value inside six months do exist. Line that up before you draw the bridge, not after.
The loan reverts to the lender's standard variable rate, which is usually materially higher. Most landlords remortgage or take a new product with the same lender.
Start four to six months out. If rental cover has weakened since you took the original loan, a product transfer with your existing lender may not require a fresh affordability assessment, where moving lender would.
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