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Buy to let deposits

Written By:
Myles Robinson - Expert Finance Advisor

Posted: Feb 9, 2023

How much deposit for a buy to let mortgage?

How much deposit is required for a mortgage buy-to-let?

Despite a rise in stamp duties for buy-to-let properties and changes to the tax system, the buy-to-let landlord sector continues to thrive even though the taxman has changed how he calculates the profit of property investors who rent out their properties for profit.

What deposit amount is required to get a 2019 buy-to-let loan also known as buy to let mortgage?

While most people assume that you will need to deposit at least 25% of the purchase price for a buy-to-let mortgage in 2019, it is possible to get lower amounts with the right advice from our specialist mortgage broker. We are often asked if the market is still available to casual investors with only a few properties or professional landlords with hundreds of properties.

What deposit is required for a buy to let mortgage?

Specialist lenders and banks are still willing to offer buy-to-let mortgages to landlords in Britain. Many banks will accept a large deposit between 30-40% and others will take 20-25%, or even 15% depending on the circumstances. However, there are fewer lenders that offer buy to let mortgages in Scotland. Higher deposits will likely be required.

It is important to seek the mortgage advice of a specialist broker like those we work with.

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Calculating how much money you can borrow for a buy-to-let mortgage

A property’s rental income is linked to the maximum amount of buy-to-let mortgage you can borrow. Lenders prefer to see a rental income that is significantly more than the monthly mortgage repayments.

The exact amount will depend on the individual’s tax status. Prudential Regulation Authority changes mean that higher-rate taxpayers will have to prove more rental income to be able to afford the mortgage and the increased tax.

This is due to an interest coverage ratio (ICR), which means that lenders typically require rent to cover mortgage payments to a different extent than if they are based on 5.5% interest.

For lower-rate taxpayers, minimum coverage of 125% is required. Higher rate taxpayers require more. Lenders may have different policies regarding the threshold for upper and higher tax calculations. They can also make decisions about cases that they consider riskier.

A PS200,000 buy-to-let mortgage would have interest at 5.5%. This would result in monthly interest payments of PS917.

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What kind of deposit will lenders accept for buy-to-let mortgages?

Capital raising from another property

A buy-to-let Ltd company can be set up by professional landlords. This can make it tax-efficient for multiple properties and allow them to use one or more properties as a down payment for a new mortgage.

Although lenders might have different requirements regarding the maximum number of mortgaged property allowed, most are willing to lend to Ltd businesses. It is important to speak with a broker who understands the specialist market for buy-to-let.

House of Multiple Occupants

Most lenders on the mortgage market will often ask for higher deposits from landlords to hold HMO properties. However, in certain circumstances, they may be willing to accept a lower deposit such as 15%.

Get a quote today from our mortgage lenders who are registered by the financial conduct authority.

Get a bridging a loan to pay a Buy to let deposit

Bridging loans are available for landlords who need to quickly secure financing for property renovations before letting it out.

The Gross Development Value is the value of a property after all work has been completed. This can be used to purchase the property or pay for renovations.

Expert mortgage brokers may also be able to access deals that allow you to automatically convert to a buy-to-let mortgage after the bridging loan is repaid.

Builder deposit incentives

A builder’s deposit is also acceptable for a buy-to-let deposit. This is for a property that is part of new development. Investors love these deals because the builder pays the deposit.

However, lenders won’t accept this source of deposit. Instead, they require that the borrower contribute their own money to the total deposit. Specialist lenders may be able to consider it (or require at least some) of their cash.

Use a gifted deposit

Our specialists can source buy-to-let property mortgages from lenders that accept concessionary purchase mortgages or gift deposits. There are two types of gift deposits. You can either give a gift from a family member, or you can get a present from someone not related to you.

Family member’s gift deposit

A spouse, parent, grandparent or sibling is usually considered an immediate family member. Talk to an advisor to determine the best lender definition for your buy-to-let mortgage criteria.

Gifts from another person

Some banks and specialist lenders will accept gifts purchased to be lent from people other than immediate family members. This list can include cousins and friends, as well as employers.

Concessionary purchases (using a discount on a BTL deposit

A concessionary deposit is another buy-to-let deposit that is linked to a family member. A concessionary deposit is when a parent or grandparent sells a property at a discount to a grandchild or adult grandchild. This effectively makes the deposit acceptable for a lender to apply for a buy to let mortgage.

Personal loans

However, unsecured loans are not allowed to be used as a deposit on a property that is being bought and leased. This means that investors and landlords who put down a 25% deposit will be permitted to use credit to finance approximately 5% of the total mortgage.

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What is the minimum deposit required to get a mortgage for buy-to-let?

The minimum deposit will differ on each purchase for various reasons.

Lenders are trying to lure investors with better deals and incentives, as part of the exodus of some landlords from buy-to-let mortgage markets.

Can I get a mortgage to buy and let with a 15% deposit?

Yes. A few specialist lenders will accept a 15% deposit for buy-to-let mortgages.

Get a quote today from our mortgage lenders who are registered by the financial conduct authority.

Can I get a mortgage to buy-to-let with no deposit?

The short answer to your question is no. The minimum deposit required by specialist lenders is 15%.

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Is it possible for a buyer-to-let mortgage to be obtained with poor credit?

Yes, it can be difficult to get a buy-to-let mortgage with bad credit. But you have the help of an expert who is experienced.

Get a quote today from our mortgage lenders.

While high street banks might not be interested in buying-to-let clients with less than perfect credit scores, the expert brokers that we work with have access to a variety of specialist lenders who are always open to looking at more complex situations.

It all boils down to:

  • The severity of the problem (the more serious the problem, the more difficult it is).
  • The date that it was registered.
  • It is better to identify the cause (unexpected life events) than general financial mismanagement.
  • How much deposit do you have? The more deposit you have for the buy the better.

No matter if you’re a landlord with only a few properties or an investor with hundreds of properties, your credit score should not prevent you from getting the right advice and best deals based on your credit history.

Our experts will spend time getting to know you, and your situation, and help you find the best mortgage for you.

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