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The minimum Buy to Let deposit in the UK is higher than for residential mortgages, with most lenders requiring a 25% deposit as standard, although some accept less. However, the exact Buy to Let deposit required will depend on your finances, the property and expected rental income. This guide explains how much Buy to Let deposit you need, what affects it, and how to secure the best Buy to Let mortgage rates.
Key takeaway: Most Buy to Let mortgages require a 25% deposit, although some lenders accept 20% and a small number offer 15% deposit mortgages. In practice, Buy to Let deposits typically range from 20% to 40%+, depending on the lender and property.
KEY INFORMATION
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The minimum Buy to Let deposit in the UK is usually 20% to 25% of the property value, although in some cases it may be lower.
However, the exact Buy to Let mortgage minimum deposit depends on the lender, your financial situation and the property you’re buying.
Some lenders may offer a 15% deposit Buy to Let mortgage, but these deals are rare and often come with:
Here’s an illustration of the deposit you may need to buy a £200,000 investment property.
| Deposit % | Deposit £ |
|---|---|
| 15% | £30,000 |
| 20% | £40,000 |
| 25% | £50,000 |
| 40% | £80,000 |
Use our Buy to Let mortgage calculator to estimate your borrowing and monthly costs. Once you have an idea, it’s a good idea to get expert advice tailored to your circumstances from a mortgage broker.
Our Mortgage Expert Sarah Tucker said: “Many people are surprised by how much deposit they need for a Buy to Let mortgage compared with a residential mortgage. While a 25% deposit is often the benchmark, the amount required can vary depending on the property, the expected rental income and the lender’s criteria. So for a personalised view on what deposit you need speak to a mortgage adviser”
“A larger deposit will usually give landlords access to a wider range of mortgage products and potentially more competitive rates. However, it’s important not to focus solely on the deposit requirement. Lenders will also want to be comfortable that the rental income supports the borrowing and that the investment remains affordable over the longer term.”
Here are common factors that can affect the BTL deposit you’ll need:
Buy to Let mortgages work differently to residential mortgages because the amount you can borrow is based on how much rent the property can generate versus the cost of the mortgage.
Typically, UK lenders will require your expected rental income to meet at least 125% of the monthly interest payments on the loan. Lenders assess this using a measure known as the Interest Coverage Ratio (ICR), which compares expected rental income with the mortgage payments.
Depending on your projected rental income, the lender may ask for a larger deposit.
Mortgage lenders in the UK will check your credit report when you apply for a mortgage. If you have a strong credit history, the lender may allow a smaller deposit, while if you have a poor credit rating you may need a bigger deposit and may have to pay higher interest rates too. Read our guide 11 Tips to improve your credit score for a mortgage.
Higher deposits may be required for certain types of properties such as new builds or houses in multiple occupation (HMOs).
A lender may require a higher Buy to Let deposit if you’re a first time buyer and apply stricter affordability checks too. Read more in our guide Buy to Let for first time buyers explained.
Get personalised advice by speaking to the award-winning expert advisers at Mortgage Advice Bureau. Compare deals or speak to an adviser today.
Get fee-free mortgage advice from the award-winning expert advisers at Mortgage Advice Bureau.
Buy to let deposits are usually higher than residential mortgage deposits because UK lenders see rental properties as a greater risk.
Unlike a standard residential mortgage, rental income is not guaranteed. If your tenant stops paying rent or leaves, you’ll still need to cover the mortgage payments.
There’s also the risk of void periods, where the property is empty and generating no income. During these times, landlords must cover costs themselves.
The rental yield is calculated by dividing the annual rental income by the purchase price, then multiplying by a 100, to give the gross rental yield as a percentage.
You may choose to buy a property further afield it you can achieve higher yields. Or you may consider investing in a house of multiple occupation (HMO) or student accommodation for higher rental income, although that comes with added responsibilities and costs.
Whether you can afford a Buy to Let deposit depends on several factors, including your available savings, equity in other properties, expected rental income and the purchase price of the investment property.
Before buying a rental property, it’s important to consider whether putting down a larger deposit is the best use of your money. A bigger deposit can reduce your borrowing costs and improve the Buy to Let mortgage rates available, but it may also limit the funds you have available for refurbishment work, unexpected repairs or future property investments.
It’s also worth considering how the deposit fits into your wider financial plans. You’ll also need sufficient funds remaining to cover legal costs, mortgage fees and other expenses associated with owning a rental property.
Some landlords buy investment properties through a limited company. While deposit requirements are often similar to personal Buy to Let mortgages, some lenders may require larger deposits or apply different affordability criteria.
Purchasing a Buy to Let property through a limited company can offer tax advantages for some investors, but professional tax advice should always be sought before making a decision.
There are two ways your deposit size can affect your Buy to Let mortgage payments.
If you’re buying an investment property, putting down a bigger deposit means you’ll be borrowing a smaller amount. This will reduce your monthly mortgage payments.
For example, if you’re buying a £200,000 investment property and take out a Buy to Let mortgage at a rate of 5%:
These examples do not include any Buy to let mortgage fees and assume the mortgage rate will remain the same over the term.
If you have a bigger BTL mortgage deposit, you may get access to better Buy to Let mortgage rates.
For example, if you’re buying a £200,000 investment property.
These examples do not include any Buy to let mortgage fees and assume the mortgage rate will remain the same over the term.
Get fee-free mortgage advice from the award-winning expert advisers at Mortgage Advice Bureau.
There are a number of common ways to raise a BTL deposit:
You don’t have to make life’s big financial decisions alone. Get the right IFA for you today with our partners at Unbiased.
Your Buy to Let deposit is only one of the upfront costs involved in purchasing an investment property.
You may also need to budget for:
Understanding the full cost of becoming a landlord can help you avoid unexpected expenses after purchase.
Get fee-free mortgage advice from the award-winning expert advisers at Mortgage Advice Bureau.
Your home may be repossessed if you do not keep up repayments on your mortgage.
Please note some branches of Mortgage Advice Bureau may charge a fee for mortgage advice if you go direct. The fee is up to 1% but a typical fee is 0.3% of the amount borrowed. So make sure you use this site, this form or phone number for fee-free advice.
No, you can’t live in your own Buy to Let property – these mortgages are designed for landlords. You’ll need a standard mortgage for a home if you want to live in the property.
The process of getting a Buy to Let mortgage has some key differences compared to getting a residential mortgage on a property you’ll live in.
For example, with a Buy to Let mortgage application, you’ll need a bigger deposit and interest rates are typically higher.
The lender will also consider your circumstances, including how many rental properties you already own and how much you owe elsewhere.
The process of getting a Buy to Let mortgage can be easier if you use a mortgage broker because they’ll do the leg-work for you.
Most lenders require a minimum Buy to Let deposit of 20% to 25% of the property value. While some lenders may offer 15% deposit mortgages, these are less common and usually come with higher interest rates and stricter criteria.
It may be possible to get a 15% deposit Buy to Let mortgage, but these deals are rare. You’ll typically need a strong financial profile and may face higher interest rates and fewer lender options.
In the UK, most landlords need a Buy to Let deposit of at least 20-25%, although some lenders may require 40% or more for the best Buy to Let mortgage rates.
Yes. A larger Buy to Let deposit reduces the amount you need to borrow, which can lower your monthly payments. It can also help you access better mortgage rates.
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