Buy-To-Let Mortgage Deposits
A mortgage broker can help you with how much deposit you'll need to invest in a buy-to-let property.
Firstly, where is your deposit likely to come from?
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However, it’s possible to buy a rental property with a small deposit if you have the right approach. In this guide, we’ll tell you which lenders require the lowest deposits and how to improve your chances of mortgage approval.
We’ll cover the following topics…
How much deposit do you need for a buy-to-let mortgage?
Around half of UK lenders have a maximum loan-to-value (LTV) of 75% and around a third have a maximum LTV of 80%. Therefore, you’ll typically need a deposit of at least 20 to 25% to find a good mortgage deal.
Lenders usually reserve the highest LTV deals for previously owned houses. If you’re buying a flat, maisonette, or a newly built property of any type, you’ll probably need a larger deposit. For example, almost no lenders will accept less than a 25% deposit for a new build flat.
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What’s the minimum deposit requirement?
A small number of lenders will consider applications with a deposit lower than 20%. Deposits of less than 10% are not out of the question but you would need to meet all of the other eligibility criteria in order to be successful.
Can you get a 100% LTV deal?
No, these types of mortgages always require a deposit. You’ll need to raise upfront capital if you want to invest in a rental property, and there are other costs to consider as well as your mortgage deposit, e.g. legal fees, letting agent fees, renovation costs and maintenance costs.
How to get a buy-to-let mortgage with a low deposit
It’s not easy to get a mortgage with less than a 20% deposit, but it’s possible if you follow these three steps.
Raise as much as you can
Refer to the list above of ways to raise a mortgage deposit and see if any of these methods will help you increase the amount you can contribute. The more capital you can raise, the more deals you’ll have access to.
Speak to a buy-to-let expert
If you can raise a 15% deposit – or even 5% – there are options available that could allow you to buy a property. Contact a specialist in buy-to-lets with low deposits for guidance. To be put in touch with someone, fill out this form.
Prepare a solid application
When your mortgage options are limited, your application must be flawless. Lenders will look at your experience as a landlord, your business accounts, and your financial projections. A great broker will help present everything in the best light.
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What type of deposit will lenders accept?
There are various ways to raise capital, and you’ll need to provide proof of the source.
Your buy-to-let mortgage deposit can come from:
How your deposit amount affects your mortgage rate
Unfortunately, you’ll usually pay a higher mortgage rate if you have a small deposit. That’s because there are fewer lenders to choose from and the ones that are available see your application as a high risk that they need to mitigate.
After the end of your fixed-rate period or discounted-rate period, you can consider remortgaging. If you’ve saved money from the rental income of the property, you can use that to remortgage at a lower LTV so that you’ll have access to more lenders.
Buy-to-let mortgage calculator
If you’d like to see how the deposit can affect your repayments, take a look at our calculator below:
Buy-to-Let Mortgage Calculator
Our buy-to-let mortgage calculator can show you how much your mortgage could cost you each month and overall. Simply enter the rental property value, deposit, anticipated monthly rent, interest rate, mortgage term and our calculator will do the rest.
Capital and repayment:
Loan to Value ratio (LTV):
Most lenders won't offer buy-to-let mortgages over a LTV of 80%.
Interest Cover Ratio (ICR):
Most lenders require rental income to be at least 125%-145% of the interest repayments for a buy-to-let mortgage.
Get started with a specialist buy-to-let broker to find out how much they could help you save on your monthly mortgage repayments.
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Which lenders require the lowest deposit?
If you’re buying a house, the BTL lenders who’ll accept the lowest deposits include Darlington, Foundation Home Loans, and Vida Home Loans. For flats, Kent Reliance and Kensington Mortgages are among your best options.
Remember that when you have very few lenders to choose from, you can’t afford to be declined. For the best chance of approval, you should work with a broker to prepare your mortgage application and carefully choose the lender best suited to your situation.
Get matched with a buy-to-let mortgage specialist
For applications like these, it’s really helpful if your buy-to-let broker has previous experience with investors who have low deposits. They’ll know what lenders look for and how to optimise your application.
If you’re not sure where to find someone with this expertise, we can help. Our broker matching service is designed to put you in touch with exactly the right person. Just give us a call on 0808 189 2301 or make an enquiry online.
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