How Buy-to-Let Mortgages Work
A buy-to-let mortgage is a loan secured against a property you intend to let to tenants rather than live in yourself. The fundamental difference from a residential mortgage is how affordability is assessed: instead of your personal income being the primary driver, the property's rental income carries most of the weight. BTL mortgages are interest-only as standard - the majority of landlords pay only the interest each month, with the capital repaid when the property is sold.
The Interest Coverage Ratio (ICR) - The Core BTL Calculation
The ICR is the calculation every BTL lender applies before agreeing to advance funds. The formula is: annual rental income divided by annual mortgage interest at the stress rate, multiplied by 100. The result must meet the lender's minimum threshold - typically 125% for basic-rate taxpayer landlords and limited company SPV borrowers, and 145% for higher-rate and additional-rate taxpayer landlords.
The stress rate is the rate used in this calculation - typically 5.5% regardless of the actual mortgage rate. This ensures the loan remains serviceable if rates rise. Using our free buy-to-let mortgage calculator, you can model your ICR at both the pay rate and stress rate and see whether a proposed purchase passes or fails the assessment before making an offer.
ICR by Landlord Type
| Landlord Type | ICR Threshold | Stress Rate (Typical) |
|---|---|---|
| Individual - Basic Rate Taxpayer | 125% | 5.50% |
| Individual - Higher Rate Taxpayer | 145% | 5.50% |
| Limited Company SPV (any tax rate) | 125% | 5.50% |
| Portfolio Landlord (4+ properties) | 125% across portfolio | 5.50% |
Personal Name vs Limited Company
Since the phased removal of mortgage interest tax relief for individual landlords - completed by April 2020 - higher-rate taxpayers have faced significantly increased tax costs on personally held buy-to-let mortgages. A limited company SPV structure preserves full mortgage interest deductibility as a company expense, making it considerably more tax-efficient for higher-rate taxpayers building or growing a portfolio.
Ltd Co BTL mortgages are available from a specialist lender panel - Precise Mortgages, Foundation Home Loans, Paragon, Fleet Mortgages, and specialist building societies are the primary providers. Rates on Ltd Co products carry a small premium (typically 0.1-0.4%) over equivalent personal-name products, but the tax saving for higher-rate taxpayers almost invariably outweighs this cost.
Portfolio Landlord Mortgages
If you own four or more mortgaged buy-to-let properties, you are classified as a portfolio landlord under PRA guidelines. This means any new BTL application must include a full portfolio schedule - all properties, rents, and outstanding mortgages - and the lender must conduct a portfolio-level ICR stress test across all properties simultaneously. Not all BTL lenders accept portfolio landlords; the specialist portfolio panel (Paragon, Fleet, Foundation, Precise) is the correct route for applications from the fourth property onwards.
BTL Rates and LTV
Rates shown are representative as at June 2026 and subject to lender discretion, credit profile, and property type. HMO, holiday let, and multi-unit products typically carry a rate premium of 0.2-0.6% above equivalent standard single-let rates.
| LTV | Typical Rate Range | Notes |
|---|---|---|
| 60% LTV | from 4.20% | Widest lender choice, best rates |
| 70% LTV | from 4.40% | Good range of standard BTL products |
| 75% LTV | from 4.55% | Standard maximum for most BTL lenders |
| 80% LTV | from 4.90% | Specialist lenders only - fewer products |
Specialist BTL Products
Our panel covers the full range of buy-to-let structures: standard single-let AST mortgages; HMO mortgages (3-10+ bedrooms, licensed and unlicensed); holiday let and Airbnb mortgages; multi-unit freehold block (MUFB) mortgages; limited company SPV mortgages; portfolio landlord facilities; expat BTL mortgages for UK nationals based abroad; and semi-commercial mortgages for properties with mixed residential and commercial use.
- Standard single-let AST mortgages
- HMO mortgages (3-10+ bedrooms, licensed and unlicensed)
- Holiday let and Airbnb mortgages
- Multi-unit freehold block (MUFB) mortgages
- Limited company SPV mortgages
- Portfolio landlord facilities
- Expat BTL mortgages for UK nationals based abroad
- Semi-commercial mortgages for mixed residential and commercial use
Eligibility for Buy-to-Let Mortgages
| Factor | Typical Requirement |
|---|---|
| Minimum deposit | 20-25% (75-80% LTV maximum) |
| Minimum personal income | £25,000 per annum from most lenders |
| ICR (basic rate / Ltd Co) | 125% at 5.5% stress rate |
| ICR (higher rate individual) | 145% at 5.5% stress rate |
| Minimum age | 21 (some lenders 18; upper age varies) |
| Property type | Standard residential; HMO, holiday let and MUFB require specialist lenders |
| First-time buyer BTL | Possible from some lenders - higher deposit typically required |