Buy To Let Deposit Explained

If you’re thinking about acquiring a buy to let mortgage, you’ll want to know how the deposit works. In this guide, we’re revealing how much you’re expected to pay upfront and how this compares to a residential mortgage.

How much is a buy to let deposit?

A buy to let deposit is typically more than a residential mortgage. You can expect to pay 25% of the property’s value (although it can vary between 20-40%). The deposit is not the only cost that tends to be higher – interest rates and mortgage arrangement fees also tend to be more expensive than a residential mortgage.

Why do you pay more?

Buy to let mortgages are seen as higher risk than residential mortgages. Landlords can have their income interrupted if a tenant stops paying rent or if there is a gap between one tenant moving out and another moving in. The higher deposit helps to protect against these potential gaps in income.

The way your loan is calculated will also be based on the amount of rental income you can reasonably expect to receive. You will only be allowed to borrow as much as your income permits, although lenders usually prefer the rental income to be at least 25% higher than your mortgage payment.

Is it possible to pay less for a buy to let deposit?

Depending on your financial circumstances it may be possible to pay a lower deposit. A mortgage broker can help you determine your eligibility, budget, and find the right buy to let mortgage for you. Speak to our experienced mortgage broker in Northampton today to book your initial consultation.

Your home may be repossessed if you do not keep up repayments on your mortgage.

The Financial Conduct Authority does not regulate some buy to let mortgages.