Mercantile Trust Logo Mercantile Trust Logo
  • Products
    • Bridging Loans
    • First Charge Bridging Loans
    • Second Charge Bridging Loans
    • Light Refurbishment Bridging Loans
    • Auction Bridging Finance
    • All Bridging Loans
    • Buy to Let Mortgages
    • First Charge Buy to Let Mortgages
    • Second Charge Buy to Let Mortgages
    • Holiday Let Mortgages
    • HMO Mortgages
    • MUFBs Mortgages
    • Student Buy to Let
    • All Buy to Let Mortgages
    • Business Loans
    • Home owner business loan
    • Buy to let business loan
    • All Business Loans

    Let's get started:

    New customers
    0800 032 3737
    Existing customers
    0800 980 6262
    Request a call back
    Make a payment
  • Existing Customers
    • Existing Customers Hub
    • Make a payment
    • Tariff of Fees
    • Product Guide

    Let's get started:

    New customers
    0800 032 3737
    Existing customers
    0800 980 6262
    Request a call back
    Make a payment
  • Intermediaries
    • Intermediaries Hub
    • Intermediary Portal
    • Intermediary Registration
    • Product criteria and Calculators

    Let's get started:

    Intermediary enquiries
    0800 032 5282
    Request a call back
    Make a payment
  • About us
    • About Us
    • About Us
    • Meet our team
    • Women in Finance Charter
    • Resources
    • Blog
    • Product Guide
    • Get in touch
    • Contact us

    Let's get started:

    New customers
    0800 032 3737
    Existing customers
    0800 980 6262
    Request a call back
    Make a payment
New clients
0800 032 3737
Existing clients
0800 980 6262
Request a call back
Make a payment
Contact us
Contact us

11 March 2025 | Product guide

Product Guide | Buy to Let Mortgages

Product Guides
Buy To Let
Orange House

What is a Buy to Let Mortgage?

A Buy to Let Mortgage is a type of loan designed specifically for landlords who purchase properties with the intention of renting them out. Unlike residential mortgages, BTL mortgages have different eligibility criteria, interest rates, and deposit requirements. They are typically interest-only, meaning landlords only pay the interest each month and repay the capital at the end of the mortgage term. However, some lenders also offer repayment options where both capital and interest are paid off monthly.

Types of Buy to Let Mortgages

HMO (House in Multiple Occupation) Buy to Let Mortgage

  • Designed for properties rented out to multiple tenants (e.g. student housing, shared accommodations).
  • Often requires a larger deposit and higher interest rates.
  • Subject to specific licensing and regulations.

Limited Company Buy to Let Mortgage

  • Suitable for landlords buying property through a limited company rather than personally.
  • More tax-efficient for higher-rate taxpayers, as profits are subject to corporation tax.
  • Typically has stricter lending criteria and higher interest rates.

Holiday Let Mortgage

  • For properties rented out as short-term holiday rentals (e.g. Airbnb, cottages).
  • Different affordability checks, often based on projected seasonal income.
  • Considered higher risk and subject to stricter lending criteria.

Multi-Unit Freehold Block (MUFB) Buy to Let Mortgage

A specialist mortgage designed for properties that contain multiple, separate rental units under a single freehold title, such as: Blocks of flats (without individual leases), Houses converted into self-contained flats, Student accommodation buildings, Co-living properties

How Do Buy to Let Mortgages Work?

If you are considering a BTL mortgage, here is a step-by-step breakdown of the process:

  1. Choose a Property – Identify a rental property in a location with high tenant demand.
  2. Assess Your Deposit – Most BTL mortgages require a deposit of 25-40% of the property’s value.
  3. Check Rental Yield – Lenders typically require rental income to be 125-145% of the monthly mortgage repayments.
  4. Apply for a Mortgage – Provide details about your income, credit history, and projected rental earnings.
  5. Property Valuation – The lender will assess the property’s value and rental potential before approval.
  6. Receive Your Mortgage Offer – Once approved, funds are released, and you can complete the property purchase.

Who Can Get a Buy to Let Mortgage?

BTL mortgages are available to individuals and limited company landlords, but lenders typically require:

  • A good credit history and financial stability. (We consider adverse credit)
  • A minimum income threshold (typically £25,000+ per year).
  • A larger deposit compared to residential mortgages (usually 25-40%).
  • The ability to meet the lender’s rental income stress test.

Pros & Cons of Buy to Let Mortgages

Pros:

  • Steady Rental Income – Provides a consistent revenue stream.
  • Capital Growth Potential – Property values tend to appreciate over time.
  • Interest-Only Repayments – Lower monthly payments help maximize cash flow.
  • Tax Benefits – Some expenses, such as mortgage interest, maintenance, and letting agent fees, may be deductible.

Cons:

  • Higher Deposit Requirements – Typically 25% or more.
  • Market Fluctuations – Property prices and rental demand can vary.
  • Tax Changes – Landlords must account for income tax and reduced mortgage interest relief.
  • Potential Vacancies – Rental void periods can impact cash flow.

Final Thoughts

Investing in buy-to-let properties can be a rewarding way to build wealth, but understanding how BTL mortgages work is crucial for success. By choosing the right mortgage, calculating rental yields, and staying informed on market trends, landlords can maximize their investment potential and achieve long-term financial stability.

Share:


Keep Reading

Man Working In His Office
Bridging loans
26 June 2025
Can I Borrow a Bridging Loan with a Limited Company?

Need fast property finance? Limited companies can access bridging loans quickly—ideal for auctions, refurbishments, or time-sensitive deals.

Read More
Lady Looking At Her Laptop
Buy To Let
Bridging Loans
13 May 2025
How many applicants can you have on a Buy-to-Let or Bridging Loan in the UK?

When applying for a buy-to-let or bridging loan in the UK, the number of applicants allowed can impact how you structure your deal.

Read More
Young Woman And Man Working With Tablet
Buy To Let
First Charge Buy To Let
7 May 2025
First Charge Buy-to-Let Mortgages: A complete guide for property investors

This guide outlines the key concepts, eligibility criteria, lending process, and considerations associated with first charge BTL lending.

Read More
A Man On A Couch With Laptop (3)
Buy To Let
4 April 2025
From rental income to capital growth: Why Buy to Let is a winning strategy for landlords

Thinking about investing in property? Buy to Let remains one of the most reliable and rewarding strategies for landlords looking to grow their wealth.

Read More
Young Girl And Boy In A Small Cafe (1)
Homeowner Business Loans
Product Guides
26 March 2025
A complete guide to Homeowner Business Loans

Ready to unlock the power of your home equity? Read our guide to learn how!

Read More
Bunch Of Young People With Boxes
Product Guides
HMO Mortgages
17 March 2025
HMO Mortgages: The ultimate guide for landlords

Thinking about investing in an HMO property? This guide covers everything you need to know about HMO mortgages!

Read More
Orange House
Product Guides
Buy To Let
11 March 2025
Product Guide | Buy to Let Mortgages

First-time investor or seasoned landlord? Learn how buy-to-let mortgages work to make smart decisions and boost your rental income.

Read More
Light Home Renovation (1)
Product Guides
Second Charge
10 February 2025
Second Charge Loans explained: How they work & when to use one

This guide explores how second charge loans work, their benefits, risks, and who they’re best suited for.

Read More
Family Home
Product Guides
Holiday Let Mortgages
21 January 2025
Product Guide | Understanding Holiday Let Mortgages

This guide explains what holiday let mortgages are, how they work, and how you can make the most of them to maximise your investment potential.

Read More
Floor Plan
Product Guides
Bridging Loans
16 December 2024
How bridging offers flexibility

Bridging loans are a short-term financing option, designed to "bridge" the gap between a financial need whilst long-term finance is being arranged.

Read More
Two Contractor Disscusing A Plan
Product Guides
Bridging Loans
10 December 2024
Can you get a bridging loan if you are a contractor?

As a contractor, you may need a short-term finance solution to quickly access funds. Bridging loans can be a great way to achieve this

Read More
Pulteney Bridge
Product Guides
Bridging Loans
3 December 2024
Product guide | Common ways to use a bridging loan

What are the common ways to use a bridging loan? In this article, we explain everything you need to know.

Read More

Join our newsletter

For monthly updates, expert insights, and the latest trends in lending.

1483
5/5
Feefo Logo
Gold Trusted Service Award 2025 Full Colour Landscape Transparent
Read all our customer reviews

Products Bridging Loan Buy to Let Mortgages Business Loans
Existing Customers Make payment Tariff of Fees
Intermediaries Intermediary Portal Intermediary Registration Product criteria and Calculators
About us About Us Meet our team Resources
Contact us Existing Customers New Customers
NACFB Light BDLA Member WIF Charter Mark FINAL PNG
Legal and privacy policy Terms of use Cookie Policy Manage Cookies

© 2025 Mercantile Trust. All rights reserved.
Postal address: Mercantile Trust Limited, Building 2, Axis, Rhodes Way, Watford, Hertfordshire, WD24 4YW.
Registered Office: 25-27 Surrey Street, Norwich, Norfolk, NR1 3NX. Mercantile Trust is registered in England No: 07023863.

Our loan products are not regulated by the Financial Conduct Authority.

YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.