Buy to Let Mortgage:
Landlord Legal Guide

A buy to let mortgage is a mortgage specifically designed for properties that will be rented out rather than owner-occupied. Unlike residential mortgages, buy to let mortgages are typically assessed on the rental income the property is expected to generate rather than the borrower's personal income. Lenders typically require the expected rental income to cover 125–145% of the monthly mortgage payment (the "stress test"). Most buy to let mortgages are interest-only, meaning the borrower pays only the interest each month and repays the capital at the end of the term.

The buy to let stress test is the calculation lenders use to assess whether the rental income from the property is sufficient to cover the mortgage payments. Most lenders require the expected rental income to be at least 125% of the monthly interest payment (at a notional rate of around 5.5%) for basic rate taxpayers, or 145% for higher rate taxpayers. This means that if the monthly mortgage payment is £1,000, the expected rent must be at least £1,250 (basic rate) or £1,450 (higher rate).

A portfolio landlord is a landlord with 4 or more mortgaged buy to let properties. Since 2017, lenders have been required to apply more stringent underwriting standards to portfolio landlords, including assessing the entire portfolio rather than just the individual property being mortgaged. Portfolio landlords must provide details of all their properties, mortgages and rental income. Some lenders have minimum and maximum portfolio sizes.

Buying through a limited company (typically a Special Purpose Vehicle or SPV) can be tax-efficient for higher rate taxpayers because corporation tax rates are lower than income tax rates, and mortgage interest is fully deductible as a business expense (unlike for individual landlords where Section 24 restricts relief to the basic rate). However, limited company buy to let mortgages typically have higher interest rates and fees, and there are additional costs for company administration, accountancy and conveyancing. We advise on the legal aspects of company structure — you should also take specialist tax advice.

When buying a property to let, you must: obtain a buy to let mortgage (not a residential mortgage) or own the property outright; comply with all landlord legal obligations including gas safety, EPC, deposit protection and right to rent checks; ensure the tenancy agreement complies with current legislation; and comply with the Renters' Rights Act 2025 requirements including the new periodic tenancy rules. If you have a buy to let mortgage, you must also comply with the mortgage conditions — for example, most buy to let mortgages require you to use an assured shorthold tenancy and may restrict the type of tenant.

Since April 2016, buyers of additional residential properties (including buy to let properties) must pay a 5% stamp duty land tax (SDLT) surcharge on top of the standard SDLT rates in England. This applies to all purchases of additional residential properties, including buy to let investments. In Wales, the equivalent surcharge under Land Transaction Tax (LTT) is 4%. We advise on SDLT planning and can handle the conveyancing for buy to let purchases.