Compare our best buy to let mortgages

Buy to let mortgages let you invest in a property and become a landlord. You usually need a large deposit to secure the best buy to let mortgage. The interest rates may be slightly higher than traditional mortgages. To purchase a buy to let property, you will need to show the lender how you'll earn 125% of the mortgage repayments in rental income. Compare our buy to let mortgage rates or explore our guide to learn more.

Property price

£

Mortgage amount

£

100% LTV

Mortgage term

years

Initial rate type

Deal length

Repayment type

Our best buy to let mortgage rates

  • Loughborough 2 Year Discount mortgage

    Initial rate 2.39%. APRC 5.1%. Set-up fees £1,499
  • Ipswich Building Society 2 Year Fixed mortgage

    Initial rate 2.95%. APRC 5.4%. Set-up fees £999
  • Ipswich Building Society 2 Year Discount mortgage

    Initial rate 2.95%. APRC 5.4%. Set-up fees £1,149
  • The Mortgage Works 2 Year Fixed mortgage

    Initial rate 2.99%. APRC 5.4%. Set-up fees £3,200
  • Clydesdale Bank 2 Year Fixed mortgage

    Initial rate 2.99%. APRC 5.2%. Set-up fees £1,999
  • Chorley & District Building Society 2 Year Discount mortgage

    Initial rate 3.07%. APRC 5.5%. Set-up fees £1,200
  • We've found 105 mortgage deals

    Loughborough

    2 Year Discount

    Initial rate

    2.39%

    APRC

    5.1%

    overall cost for comparison

    Set-up fees

    £1,499

    Monthly payment

    £708.96

    for 24 months

    Ipswich Building Society

    2 Year Fixed

    Initial rate

    2.95%

    until 30-09-2021

    APRC

    5.4%

    overall cost for comparison

    Set-up fees

    £999

    Monthly payment

    £754.58

    for 24 months

    Ipswich Building Society

    2 Year Discount

    Initial rate

    2.95%

    APRC

    5.4%

    overall cost for comparison

    Set-up fees

    £1,149

    Monthly payment

    £754.58

    for 24 months

    Ipswich Building Society

    2 Year Discount

    Initial rate

    2.95%

    APRC

    5.4%

    overall cost for comparison

    Set-up fees

    £1,149

    Monthly payment

    £754.58

    for 24 months

    Ipswich Building Society

    2 Year Fixed

    Initial rate

    2.95%

    until 30-09-2021

    APRC

    5.4%

    overall cost for comparison

    Set-up fees

    £999

    Monthly payment

    £754.58

    for 24 months

    Ipswich Building Society

    2 Year Discount

    Initial rate

    2.95%

    APRC

    5.4%

    overall cost for comparison

    Set-up fees

    £1,149

    Monthly payment

    £754.58

    for 24 months

    Ipswich Building Society

    2 Year Fixed

    Initial rate

    2.95%

    until 30-09-2021

    APRC

    5.4%

    overall cost for comparison

    Set-up fees

    £999

    Monthly payment

    £754.58

    for 24 months

    The Mortgage Works

    2 Year Fixed

    Initial rate

    2.99%

    until 30-09-2021

    APRC

    5.4%

    overall cost for comparison

    Set-up fees

    £3,200

    Monthly payment

    £757.91

    for 24 months

    Clydesdale Bank

    2 Year Fixed

    Initial rate

    2.99%

    until 30-09-2021

    APRC

    5.2%

    overall cost for comparison

    Set-up fees

    £1,999

    Monthly payment

    £757.91

    for 24 months

    Chorley & District Building Society

    2 Year Discount

    Initial rate

    3.07%

    APRC

    5.5%

    overall cost for comparison

    Set-up fees

    £1,200

    Monthly payment

    £764.58

    for 24 months

    Not ready to get a mortgage?

    Learn more about how to get a mortgage

    Show simple deals list

    Representative example:

    If you borrowed £200,000 payable over 25 years, with an initial fixed-rate for two years at 4.79%, your monthly payments would be £1,144.84 for 24 months. This would then revert to a standard variable rate (SVR) of 4.24% for the remaining 23 years, costing £1,086.24 per month for 276 months. Overall cost for comparison is 4.5% APRC representative. The total amount payable over the full term would be £328,272, including product fee of £995 and interest of £127,277.

    Your home may be repossessed if you do not keep up repayments on your mortgage.

    What is a buy to let mortgage?

    A buy to let (BTL) mortgage allows you to buy a property and rent it out. By doing this, you become a landlord. You cannot live in the property with a buy to let mortgage.

    Buy to let mortgages are similar to standard residential mortgages, but can be much harder to get. You normally need a deposit of at least 25% (75% LTV) to 40% (60% LTV) and buy to let interest rates are higher.

    Buy to let mortgages are available in all the usual flavours: fixed rate, tracker, and variable.

    You can improve your return on a buy to let investment by improving a property – unlike stock market investments that are dictated by market performance, or savings accounts where the interest rate can change.

    Compare our best buy to let mortgages

    Can you get a buy to let mortgage?

    Most buy to let mortgages are interest only. To secure an interest only mortgage, you need a way to pay off the principal at the end of the mortgage term. This is called a repayment vehicle.

    The simplest way to repay the principal amount is to sell the property. You will break even or make a profit as long as house prices have not gone down.

    During the property boom a few years ago, landlords could make a lot of money by buying property and renting it out. Today the property market is softer – but the stock markets are volatile and you earn next to nothing from savings accounts.

    Because mortgage rates are also low, investing in property via buy to let seems attractive. But recent changes to buy to let property tax rules have made harder to make a profit.

    You may need to be over a minimum age to get a buy to let mortgage. And you can normally only have three or four buy to let mortgages at a time. The total amount borrowed through buy to let mortgages cannot exceed £1 to £2 million.

    Mortgage lenders assess the affordability of the buy to let mortgage based on the expected rental income. Most require rental income that’s at least 125% of the mortgage’s monthly repayments. The extra cash provides a buffer for when the property is vacant, or if a tenant does not pay their rent on time.

    One big advantage of BTL is that you can earn in two different ways: rental income and property value increases.

    Calculate how much you can borrow
    Explore all our mortgage calculators

    The risks of buy to let investing

    Think about the risks before using buy to let to invest in a property. Make sure you could afford mortgage repayments if:

    • Interest rates go up
    • You cannot find a tenant and so have no rental income
    • The value of the property goes down

    If interest rates rise and you are on a variable rate mortgage, your monthly repayments could go up. This does not necessarily mean you could just increase the rent to cover the difference.

    Your payments will stay the same on a fixed rate buy to let mortgage, but could increase when the deal ends. Could you afford higher interest rates?

    Factor into your budget your property being empty for two months a year as insurance. And budget for repairs, new furniture and maintenance. Try to set aside enough for major, unexpected problems like flooding or roof repairs.

    Finally, be prepared for rogue tenants who damage the property or leave owing money. They’re rare but they exist. You can reduce the risk by using the Tenancy Deposit Scheme and by taking out landlord or rent guarantee insurance.

    Buy to let tax

    There used to be significant tax benefits to earning income with buy to let properties.

    But since April 2016, the government has introduced two major buy to let tax changes. The first was extra stamp duty charges to almost every BTL property purchase. The second was how mortgage interest tax relief is applied.

    What is the impact of the buy to let tax changes?

    Mortgage interest amounts can no longer be deducted from any income you earn from a buy to let.

    Mortgage interest tax relief is now applied at a blanket rate of 20% on all mortgage interest payments on a BTL property. This reduces profits in almost all cases.

    Find out more about tax changes at the Money Advice Service website.

    Buy to let stamp duty

    Before the changes, you'd incur the same stamp duty charges on a BTL property as a normal residential purchase.

    The stamp duty change means that anyone buying a BTL property has to pay an extra 3% of stamp duty above the usual rate. This is the same as if you were buying a second home (that you did not rent out).

    For example: you buy a property as your main home for £250,000. The first £125,000 is stamp duty-free. Because it is not your first property purchase, you pay 2% stamp duty on the remaining £125,000. That's £2,500.

    But say that £250,000 property was a buy to let. You’d have to pay 3% on the first £125,000 (0% + 3%), plus 5% (2% + 3%) on the remaining £125,000. The total stamp duty you would end up paying is £10,000. That's an extra £7,500 compared to the old rules.

    Use our stamp duty calculator to work out how much tax you’ll have to pay. Or, explore our guide to learn more about stamp duty as a whole.

    Buy to let stamp duty calculator

    Buy to let tax relief

    The second tax change is for mortgage interest tax relief. Most BTL properties are bought on an interest-only basis, with landlords relying on selling the property to repay the loan.

    Following a change in BTL income tax in April 2017, you cannot deduct mortgage interest on rental income. So, tax is now charged on turnover not profits.

    The changes have been phased in over four years:

    • In 2016/17, 100% of mortgage interest was deductible
    • In 2017/18, 75% was deductible
    • In 2018/19, 50%
    • In 2019/20, 25% is deductible

    For 2020/21, mortgage interest tax relief will be limited to the basic rate of income tax. This is currently 20%. Because higher rate taxpayers were initially entitled to 40% relief, they are the most affected by the restricted relief of 20%.

    Before 2016/17, landlords could deduct mortgage interest from rental income, before calculating tax. Now, only certain allowable costs can be deducted from rental income before tax.

    These costs include letting agent fees to find tenants and manage the property, advertising for a tenant, credit checks, building and contents insurance, council tax, utility bills, furniture, maintenance and repairs.

    After deducting any of these allowable costs, tax is charged at 40%. Then mortgage interest relief is applied at 20% of the cost of mortgage interest.

    Stay with us here...

    Under the old system, if you had £12,000 annual rental income and your mortgage cost £6,000 (with allowable costs of £2,000), the amount you could be taxed on would be £4,000. The rate of tax would have been 40%, so you would owe £1,600. Your BTL profit would have been £2,400.

    Under the new system (once it’s fully implemented in 2020/21), the same £12,000 rental income and £2,000 allowable costs makes the total the taxable income £10,000. Your tax bill will amount to £4,000 (40% of £10,000). Mortgage interest tax relief is deducted at 20% (£1,200) of the remaining £6,000. So you will owe £2,800 in tax. This means your profit is just £1,200 – half the amount as under the old system.

    BTL mortgage interest rates

    Rates are usually higher for buy to let than for residential mortgages. That said, all mortgage rates are still historically low.

    Due to the tax changes, some landlords have left the BTL market. Perhaps to encourage new borrowers, lenders are now offering the lowest BTL rates seen since records began in 2012. The average BTL interest rate for someone with a 25% deposit is 2.27%.

    Like all mortgages, the bigger the deposit, the smaller the loan-to-value (LTV) ratio and the better the deals available.

    Remember though, that interest rates could rise. Make sure you could make repayments on your investment with higher rates.

    What is buy to let yield?

    When you’re negotiating a mortgage, the lender will ask about your expected rental yield.

    Rental yield is the annual rent received as a percentage of the property purchase price. For a property costing £240,000, an annual rent of £12,000 would mean a yield of 5%.

    Try to aim for an 8% rental yield to ensure there's enough cashflow to cover expenses, maintenance costs and problems.

    In the case of a BTL property, the rental yield is a measurement of how much cash it generates each year as a percentage of the asset’s value.

    The gross yield is the return before expenses, whereas the net yield is the return after costs. The net yield provides a truer picture of profit for a BTL investor or landlord.

    What extra costs come with a buy to let property?

    Extra costs can include property damage, roof repairs, new furniture, fences and more. Many of these costs are considered allowable expenses, so are tax deductible.

    The biggest hit to BTL rental income will likely be periods without a tenant. Losing even one month of rental income can have a big impact on rental yield as a whole.

    Where are the best places to invest in buy to let property?

    University towns guarantee a new intake of students every year, and cities with cheap housing are often the best BTL locations with the strongest yields.

    First, decide on the type of property you can afford. The type of property you choose will influence the type of tenant you attract. For instance, a one bedroom or studio flat might be best for a student, single professional or a couple.

    Larger properties give more options including families or big groups. If you'd prefer families, consider what the local schools are like.

    How to generate a passive income stream
    How to retire a millionaire

    Compare other types of mortgage

    Edited by: Sarah Guershon & Ben Salisbury

    Did you find this useful?

    Last updated: 10 July, 2019

    © 2019 Bankrate and its licensors. All rights reserved. Bankrate is a trading name of uSwitch Limited, registered in England and Wales (company number 03612689). uSwitch Limited is authorised and regulated by the Financial Conduct Authority under firm reference number 312850. You can check this on the Financial Services Register by visiting the FCA website: www.fca.org.uk/register. Our registered address is The Cooperage, 5 Copper Row, London, SE1 2LH.

    Bankrate services are provided at no cost to you, but we may receive a commission from the companies to which we refer you.

    We use cookies to enhance your experience with our tools and services. By clicking ‘Agree’ you accept our Cookie Policy.