If you’re planning to rent out a property that you don’t own outright, one of the first things you’ll need to know is how much deposit you’ll need to get a buy to let mortgage.
What is the typical deposit for a buy to let mortgage?
If you want to buy a home to rent out, you’ll need a bigger deposit than if you were buying your own home. This is because lenders think buy to let mortgages are more risky. If the house is empty or the tenant doesn’t pay rent, you might not be able to repay the loan.
So, how much deposit for a buy to let mortgage do you need?
Most of the time, you’ll need at least 25% of the property’s value. For example, if the home costs £200,000, your deposit should be £50,000.
Some lenders may accept smaller or larger deposits. But for most landlords, 25% is normal.
Minimum deposit percentage required
The buy to let mortgage minimum deposit starts from 20%, but the most common figure is 25%. You may get 15% deals very rarely, and with higher interest rates or strict lending rules.
Here’s a quick breakdown:
- 15% deposit – Rare and difficult to qualify for
- 20% deposit – Available but may need a strong rental income
- 25% deposit – Standard for most buy to let mortgages
- 40% deposit or more – May get better rates and terms
In short, a buy to let mortgage low deposit deal may cost more in the long run.
How does loan to value affect your options?
Loan-to-value (LTV) is the ratio between your loan amount and the property’s value. For example, if you borrow £150,000 to buy a £200,000 property, your LTV is 75%.
The lower your LTV, the better your deal is likely to be. Lenders offer better interest rates to people with bigger deposits because they’re seen as lower risk. That’s why understanding the relationship between LTV and deposit size is key when applying for a buy-to-let mortgage.
Here’s a simple way to look at it:
- Higher deposit = Lower LTV = Better interest rates
- Lower deposit = Higher LTV = Higher risk for lender
Getting your LTV right from the start can improve your chances of approval and help you secure a more cost-effective mortgage deal.
Does the property type or value affect the deposit?
Yes, it can. Lenders often look at the property type and location before confirming the buy to let mortgage deposit needed. Some property types are seen as riskier, so lenders may ask for more upfront.
For example:
- Flats above shops, or HMOs (houses in multiple occupation), usually need a higher deposit.
- New build properties sometimes require a 30% deposit.
- Low-value properties under £50,000 may not qualify for some mortgages at all.
So, even if you’re aiming for a standard buy to let mortgage deposit, the type of property could increase the amount you need to save.
What types of deposits will be acceptable to a lender?
Not all deposit sources are treated equally. Lenders want to know where your money is coming from. In most cases, the deposit needs to come from your own savings, but there are other acceptable sources as well.
Here are a few commonly accepted deposit sources:
- Personal savings: This is the most straightforward option.
- Equity release or remortgage: You might release equity from your own home to fund the deposit.
- Sale of another property: If you’ve recently sold a home or another rental, you can use that cash.
- Family gift: Some lenders accept gifted deposits, but they’ll need a letter to confirm it’s not a loan.
Lenders may not accept:
- Unsecured borrowing: Using a personal loan or credit card for a deposit is usually not allowed.
- Overseas funds without proof of origin: Large deposits from abroad must have clear documentation.
The more transparent your source of funds, the better your chances. If you’re unsure what counts, revisit the general buy to let mortgage requirements before applying.
How to get a buy to let mortgage with a low deposit
Most buy to let mortgages need a deposit of around 25%, but some lenders do offer low-deposit options. Getting approved, however, can be a bit harder.
Here are a few ways to boost your chances:
- Improve your credit score
Lenders want to see that you’re good at handling money. A strong credit score helps. - Pick a cheaper property
A lower-priced home means you’ll need a smaller deposit, even if the percentage stays the same. - Aim for high rental income
If the rent is high compared to the mortgage, lenders may see it as less risky. - Use a mortgage broker
Brokers know which lenders offer low-deposit deals and can guide you through the process.
Remember, even if a buy to let mortgage minimum deposit is 20%, you might pay higher interest rates, which can cost more over time.
Buy to let deposit requirements for limited companies
If you’re buying a property through a limited company, the rules are a bit different. Most lenders ask for a deposit of 25%, but some may want 30% or even 35%.
This is because lending to a company is considered higher risk, so banks are more cautious.
Here’s what to expect:
- You may need to give a personal guarantee if you’re a director.
- Lenders will check the company setup and who is involved.
- Checks are often stricter than for individual landlords.
Even though the deposit can be higher, there may be tax benefits when using a company. It’s smart to speak with a tax adviser or mortgage broker before making a decision.
Also, compare buy to let interest rates carefully—company rates may differ from those for individuals
Advice for landlords saving for a deposit
Saving for a buy to let mortgage deposit can feel like a big hurdle, especially if property prices are high in your area. But with a clear plan and the right steps, it becomes more manageable.
Here are a few tips to help you build your deposit faster:
- Set a monthly savings goal: Break the total deposit down into smaller targets. Automate your savings to stay consistent.
- Cut down on unnecessary expenses: Even small changes in spending habits can add up over time.
- Explore government ISAs or savings schemes: Some savings accounts offer bonuses or better interest when used for property investment.
- Track the market regularly: Property values and interest rates shift. Being aware of trends may help you spot better opportunities or target cheaper areas.
If you’re thinking long-term, consider building towards a lower loan to value position. This may give you access to better buy to let interest rates when you apply for a mortgage.
Also, keep in mind that lenders will expect you to meet other conditions beyond the deposit.
Final thoughts
So, how much deposit for a buy to let mortgage do you need? The short answer is: most landlords need around 25%. But your situation, the property type, and the lender’s policies all play a role.
Whether you’re aiming for a buy to let mortgage low deposit deal or setting up through a company with a higher buy to let mortgage limited company deposit, make sure you’re fully informed before applying.
Want to take the next step? Explore your options with our main buy to let mortgage page.