What Is Buy-to-Let Mortgage?
A mortgage designed for properties purchased as rental investments, with different lending criteria and typically higher rates than residential mortgages.
Definition
A buy-to-let (BTL) mortgage is specifically for properties you intend to rent out rather than live in. Lenders assess affordability primarily on expected rental income rather than your personal salary, typically requiring rental yield of 125-145% of the mortgage payment at a stressed interest rate. Deposit requirements are higher (usually at least 25%). BTL mortgages are often interest-only, with the expectation that the property is sold at the end of the term. Additional stamp duty applies at purchase (currently 5% surcharge on each band). Landlords must also consider income tax on rental profits, capital gains tax on sale, and HMRC's restriction on deducting mortgage interest.
Example
You buy a £200,000 rental flat with a £50,000 deposit and a £150,000 BTL mortgage at 5.5% (interest-only). Monthly interest = £687.50. You charge £900 rent. After tax and costs, your net yield matters more than the gross.