Whether you are a landlord looking to expand your property portfolio, looking to refinance, or you’re just starting out on your investment journey, We Do Mortgages explains everything you need to know about Buy-to-Let mortgages.
Since their introduction in the mid-90s, Buy-to-Let mortgages have empowered landlords and investors to finance growing property portfolios. This has fuelled the rise of property rentals as a robust business strategy, offering both consistent income and the potential for capital growth.
With nearly 20% of UK households now in private rented accommodation (English Housing Survey), the demand for Buy-to-Let properties is undeniable and shows no signs of slowing down. This need is further highlighted by the UK's significant housing deficit, 4.3 million homes, according to the Centre for Cities, and a projected population increase of 7.3% by 2032 (ONS), stressing the crucial role of private landlords in bridging the supply-demand gap.
Demonstrating strong sector confidence, Buy-to-Let mortgage approvals surged by 39.2% year-on-year in Q4 2024 (UK Finance). This significant uptake underscores the resilience of the market, even amidst ongoing reforms like the Renters’ Rights Bill and evolving tax regulations, including Stamp Duty adjustments.
What is a Buy-to-Let Mortgage?
If you're planning to invest in property for rental income, a Buy-to-Let mortgage is the financial product you'll need to fund your purchase.
Unlike more traditional mortgages, they are designed with the residential rental market in mind. Lenders usually require a higher deposit, often starting around 25% of the property's value and, as borrowing for a Buy-to-Let (BTL) purchase is seen as a business venture, interest rates and fees can differ depending on the lender you intend to go with.
If you’re a landlord looking for expert advice, the team at We Do Mortgages are here to help. Contact us today for your initial fee-free consultation to discover how we can help you secure the most suitable Buy-to-Let mortgage rates.
How does a Buy-to-Let mortgage work?
At its core, a Buy-to-Let mortgage functions similarly to a standard home loan. Landlords borrow against the value of the property, putting down a deposit and repaying the remaining loan amount, plus interest, over a set period.
Generally speaking, there are two options for landlords seeking a BTL mortgage, which include interest-only or repayment, where capital and interest are paid off.
Before deciding which option is right for you, it’s important to establish your goals as a property investor and consider the pros and cons of your options before borrowing.
If you opt for an interest-only Buy-to-Let mortgage, your monthly payments will only cover only the interest accrued on the loan. The original loan amount remains outstanding and is repaid through the sale of the property or another source of funds at the end of the mortgage term.
Investors also have the option to choose a repayment loan, which means that each monthly payment includes both the interest due and a portion of the original loan amount. Over time, this gradually reduces your outstanding debt, and you'll own the property outright once the term ends.
There’s also the choice of fixed or variable rates. If you decide on a fixed rate, the interest rate remains the same for a specific period, offering predictable monthly payments; however, a variable interest rate can fluctuate in line with changes in the lender's standard variable rate or a benchmark interest rate.
Choosing a Buy-to-Let mortgage involves understanding various loan options, each with its benefits and potential risks.
If you’re unsure which Buy-to-Let mortgage is right for you, contact the experts at We Do Mortgages for an initial fee-free consultation. Our friendly team of professionals will listen to your circumstances and goals and can help you secure the most suitable rates to help you achieve them.
Change in personal circumstances?
We understand that personal circumstances can change, and it’s common for homeowners to want to rent out their former residence for a multitude of reasons. If this applies to you, it’s worth noting that residential and BTL mortgages have distinct terms, so if you plan to rent out your former home, you must secure a Buy-to-Let mortgage. If you fail to do so, it will most likely be considered a breach of the terms of your existing residential mortgage.
Buy-to-Let Mortgages in 2025
For investors looking to secure or renew a Buy-to-Let mortgage in 2025, it’s important to stay up-to-date with what’s happening in the economy.
As of May 2025, the base rate was reduced by the Bank of England to 4.25%. This recent change highlights the need to keep track of interest rates as they have the potential to go up or down.
With the current global economic headwinds, analysts have suggested that the Bank of England may look at decreasing the base rate in 2025. However, it’s important to note that this is a forecast; therefore, investors should always proceed with caution and continue to keep an eye on rates as the year unfolds.
Buy-to-Let Mortgage Explained by We Do Mortgages
We hope our Buy-to-Let Mortgage Explained guide will help you make an informed choice about which options may be right for you. It’s worth remembering that the goal is to secure a mortgage product that offers competitive rates and also provides the flexibility and support necessary to manage your investment effectively.
If you need help, contact We Do Mortgages today for your initial fee-free consultation to get your next Buy-to-Let mortgage explained.
The FCA does not regulate some forms of Buy-to-Let mortgages.
On clicking the above (Centre for Cities, ONS, UK Finance and Bank of England) links, you will leave the regulated site of We Do Mortgages Ltd. Neither We Do Mortgages Ltd, nor Sesame Ltd, is responsible for the accuracy of the information contained within the linked site.
