🏠 Buy-to-Let Mortgage Calculator
📈 BTL Mortgage Results
📅 First Year Interest Payments
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Results are estimates for illustration purposes. Actual rates depend on your credit profile and lender. Remember to budget for Stamp Duty, solicitor fees, surveys, landlord insurance and other purchase costs.
🏠 How Buy-to-Let Mortgages Work
A buy-to-let (BTL) mortgage is designed for properties you intend to rent out rather than live in. BTL lending works differently from residential mortgages in several important ways. The lender assesses affordability primarily on the expected rental income rather than your personal salary, and the terms, rates and deposit requirements are all distinct from standard home loans.
Most BTL mortgages are taken on an interest-only basis, meaning your monthly payments cover only the interest charge. The original loan amount (capital) remains outstanding for the full term. This keeps monthly costs low and maximises cash flow, but you need a plan to repay the capital at the end — typically by selling the property, remortgaging, or using other savings.
💵 Key BTL Mortgage Requirements
- Deposit: Minimum 25% (75% LTV). Some specialist lenders accept 20%, but rates are significantly higher. Best rates available at 40%+ deposit.
- Interest rates: Typically 0.5–1.5% higher than equivalent residential rates. As of 2026/27, typical BTL rates range from 4.5% to 6.5%.
- ICR requirement: Rental income must cover at least 125–145% of the monthly interest at a stress-tested rate (usually 5.5%).
- Personal income: Many lenders require a minimum personal income of £25,000 outside of rental income.
- Age limits: Most lenders set a maximum age of 75–85 at end of the mortgage term.
📜 Section 24 — The Tenant Tax
Since April 2020, Section 24 of the Finance Act has fully replaced the old mortgage interest relief system. Under the previous rules, landlords could deduct mortgage interest from rental income before calculating tax. Now, landlords must:
- Pay income tax on all rental income (before mortgage interest)
- Receive a 20% tax credit on mortgage interest payments
For basic-rate (20%) taxpayers, the net effect is zero — the 20% credit equals the 20% tax that would have been saved under the old deduction method. However, for higher-rate (40%) and additional-rate (45%) taxpayers, the difference is substantial. A higher-rate taxpayer previously saved 40p in tax for every £1 of mortgage interest; now they only get a 20p credit. This effectively doubles the tax cost of mortgage interest for higher-rate taxpayers.
🏠 Capital Gains Tax on BTL Disposal
When you sell a buy-to-let property, any profit above your annual CGT allowance (£3,000 for 2026/27) is subject to Capital Gains Tax. Residential property gains are taxed at 18% for basic-rate taxpayers and 24% for higher/additional-rate taxpayers. You must report and pay CGT on UK property within 60 days of completion. Use our Capital Gains Tax Calculator to estimate your liability.
💲 SDLT Surcharge for BTL Properties
Since April 2025, buy-to-let and second property purchases in England and Northern Ireland attract a 5% Stamp Duty Land Tax surcharge on top of the standard SDLT rates. This applies to the entire purchase price across all bands. For example, on a £300,000 BTL property:
- Standard SDLT: £2,500
- 5% surcharge: £15,000
- Total SDLT: £17,500 (effective rate 5.8%)
This is a significant upfront cost that must be factored into your investment calculations. Use our Stamp Duty Calculator for a detailed breakdown.
💼 Portfolio Landlord Rules
If you own four or more mortgaged buy-to-let properties, you are classified as a portfolio landlord under PRA (Prudential Regulation Authority) rules introduced in 2017. This triggers additional scrutiny from lenders:
- Lenders must assess the performance of your entire portfolio, not just the individual property
- You may need to provide a detailed business plan and cash flow forecast
- Each property in the portfolio must meet ICR requirements individually
- The overall portfolio must demonstrate sustainable income coverage
- Some mainstream lenders do not lend to portfolio landlords — you may need specialist lenders
📋 Incorporation — Should You Use a Limited Company?
Many landlords now purchase BTL properties through a limited company (SPV — Special Purpose Vehicle) for tax efficiency. Key considerations include:
- Corporation Tax: Companies pay 25% Corporation Tax on profits (or 19% for profits under £50,000). Mortgage interest is a deductible expense, avoiding Section 24.
- Dividend extraction: Taking profits out of the company incurs dividend tax (8.75%/33.75%/39.35%), so the total tax may not be lower.
- Mortgage availability: Fewer lenders offer company BTL mortgages, and rates may be higher.
- Transfer costs: Moving existing properties into a company triggers CGT on the market value gain and SDLT on the transfer.
- Best for: Higher-rate taxpayers buying new properties, those building a portfolio, or landlords who reinvest profits rather than withdrawing them.
📝 Worked Examples
🏠 Example 1 — Starter BTL Investment
🏠 Example 2 — City Centre Flat
🏠 Example 3 — HMO Investment
❓ Frequently Asked Questions
Most buy-to-let lenders require a minimum deposit of 25% (75% LTV). Some specialist lenders accept 20%, but rates are significantly higher. A larger deposit of 40%+ unlocks the best BTL interest rates and makes it easier to pass the ICR stress test. Unlike residential mortgages, there are no 5% or 10% deposit BTL products available.
The ICR measures whether your rental income covers the mortgage interest. It is calculated as monthly rent divided by monthly interest payment. Most lenders require at least 125% ICR at a stress-tested rate of 5.5%, regardless of your actual mortgage rate. Higher-rate taxpayers may need 145% ICR. If your ICR falls below the threshold, you may need a larger deposit to reduce the loan and therefore the interest payment.
Section 24 replaced the old system where landlords deducted mortgage interest from rental income before calculating tax. Now, landlords pay tax on the full rental income and receive a 20% tax credit on mortgage interest. Basic-rate taxpayers see no change, but higher-rate (40%) taxpayers effectively lose 20% of their mortgage interest as tax relief, and additional-rate (45%) taxpayers lose 25%. This can turn a profitable property into a loss-making one on an after-tax basis.
Yes. Buy-to-let and second properties attract a 5% SDLT surcharge on top of the standard Stamp Duty rates in England and Northern Ireland. This applies across all bands from the first pound. On a £300,000 BTL property, the surcharge alone is £15,000. This is a significant upfront cost that must be factored into your investment analysis.
Most BTL landlords choose interest-only because it maximises monthly cash flow. The property itself typically acts as the repayment vehicle — you plan to sell it at the end of the term to repay the loan. Monthly payments are significantly lower with interest-only. However, repayment builds equity over time and means you own the property outright at the end. Your choice depends on your investment strategy, cash flow needs and whether you want to build a debt-free portfolio.
A portfolio landlord owns four or more mortgaged buy-to-let properties. Since 2017, PRA rules require lenders to assess the entire portfolio’s performance, not just the individual property. You need detailed business plans, cash flow projections and evidence that all properties meet ICR requirements. Some mainstream lenders do not offer portfolio landlord products, so you may need specialist lenders with higher rates.