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Buy-to-let mortgages explained

How a buy to let mortgage works, what lenders test, what it costs to buy and run a rental, and the rules landlords need to know, with a free calculator for each step.

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3D glass house with a sign, for buy to let mortgages explained

Quick answer

A buy to let mortgage is for a property you rent out. Lenders base how much you can borrow mainly on the rent, not your salary: the rent usually has to cover the interest by 125% to 145%, tested at a rate of at least 5.5%. Most need a 25% deposit, and most landlords choose interest only.

Buying adds Stamp Duty at the higher rates, and running it brings costs, tax and rules that a home does not.

Average buy-to-let 5 year fix 
Average buy-to-let 2 year fix 
Bank Rate 
DepositUsually 25%
Rent cover125% or 145%
Tested atAt least 5.5%

Updated today

Average buy-to-let 5 year fix
 
Personal, Theo’s rules
Average buy-to-let 2 year fix
 
Personal, Theo’s rules
UK average gross yield
 
Across rentals
Bank Rate
 
Bank of England
Usual deposit
25%
Some lenders 20%
Rent cover
125% to 145%
Of the interest
Stress rate
5.5%+
Most lenders
Higher rate Stamp Duty
+5%
England and NI

How lenders decide

  • RentMust cover the interest by 125% or more.
  • StressTested at a rate of at least 5.5%.
  • DepositUsually 25%, sometimes 20%.
  • YouOften £25,000 income and owning your home.
Theo app buy to let borrowing result showing the rent supports a loan of up to £187,000 at 125% rent cover tested at 5.50%
Example screen from the Theo app, October 2026.

Buy-to-let in Theo

  • BorrowingThe rent test, worked out
  • Yield and returnGross, net and cash flow
  • Stamp DutyThe higher rates
  • PortfolioLTV and the stress test

For landlords now

Since 1 May 2026 the Renters’ Rights Act has ended no fault evictions, and rent can rise only once a year.

Renters’ Rights ActEngland

Personal or company?

See how ownership changes things.

Rent cover lenders usually want

Rental income as a share of the interest at the stress rate.
How you own itRent cover
Basic rate taxpayer125%
Higher rate taxpayer145%
Additional rate taxpayer165%
Limited company125%

The rent decides the loan

£1,200 a month supports about £187,000 on a 5 year fix at 125% cover.

Average buy-to-let 5 year fix 
Usual deposit25%

How a buy to let mortgage works

A buy to let mortgage is for a property you intend to rent out. Most landlords take it on an interest only basis, paying just the interest each month and repaying the loan when they sell or refinance. Lenders size the loan mainly on the rent: the rent must cover the interest, at a stress rate, by a set margin. See the buy to let mortgage calculator.

Deposits and rates

Most buy to let lenders want a 25% deposit, and a few go to 80% loan to value. Rates are usually a little higher than for a home, and fees are often higher too, sometimes a percentage of the loan. Limited company mortgages usually cost a little more again. Many lenders also want you to own your own home and earn at least £25,000 a year.

The cost of buying and running a rental

Stamp Duty on a rental is charged at the higher rates: in England and Northern Ireland, 5% on top of every band. See buy to let Stamp Duty. Then come legal fees, a survey, safety certificates, letting agent fees, repairs, insurance and empty weeks between tenants. The rental yield calculator adds them up.

Tax for landlords

If you own a rental personally, rent is added to your income for tax, and mortgage interest is no longer deducted. Instead you get a tax credit worth 20% of the interest, which hits higher rate taxpayers hardest. That is why many landlords now buy through a company, which pays corporation tax and can deduct interest in full. See limited company buy to let, and speak to an accountant before choosing.

Rules landlords need to know

In England, since 1 May 2026, the Renters’ Rights Act has ended no fault evictions and limited rent rises to once a year. Landlords must meet safety, deposit protection and licensing rules, and houses in multiple occupation have extra licensing. See HMO mortgages and portfolio landlords if you own four or more mortgaged properties.

Common questions

How does a buy to let mortgage work?
It is a mortgage for a property you rent out. Lenders size it mainly on the rent, which usually has to cover the interest by 125% to 145% at a stress rate. Most are interest only, with a 25% deposit.
How much deposit do I need for buy to let?
Usually 25% of the price, and sometimes 20%. A bigger deposit can bring lower rates and make the rent test easier to pass.
Can I get a buy to let mortgage as a first time buyer?
Some lenders allow it, but many want you to own your own home first, and fewer lenders will consider you.
Is buy to let still worth it?
It depends on the yield, your tax position and the costs. Higher rates and tax changes have squeezed returns, so work out the net yield and cash flow before buying.
Do I need a limited company for buy to let?
No, but many landlords use one, because companies can deduct mortgage interest in full. It has its own costs and tax, so take advice from an accountant.

Keep exploring

Buy-to-let mortgage calculatorHow much the rent lets you borrow. Rental yield calculatorGross, net, cash flow and return. Buy-to-let Stamp DutyThe higher rates, worked out. Limited company buy-to-letPersonal or company, compared. Portfolio landlordsHow lenders test four or more. HMO mortgagesLicensing, lenders and valuations.

Written by Jason Foord, CeMAP-qualified mortgage adviser and Director of Verifi Mortgages Ltd (FCA No. 997175), and founder of Theo. Updated 16 October 2026. Live figures on this page update automatically.

Theo App Ltd is not authorised by the Financial Conduct Authority and does not give mortgage advice. This page is information only and is not a recommendation. Average buy-to-let rates come from Theo’s rules, checked on the date shown. A guide, not offers. Speak to an FCA-authorised mortgage adviser about your own circumstances.

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