How to get a BTL - Molo Finance

How to get a buy-to-let property

Simon Banks

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Buying to let

There are more than two-million landlords in the UK, which just goes to show how popular buy-to-let is as an investment. Even with restrictions, such as paying an extra 3% for stamp duty and the removal of claiming interest rates against tax relief, many investors still consider buy-to-let one one of the smartest ways to invest their money. If you’re new to investing in bricks and mortar, we’ve got everything you need to get up and running with a buy-to-let. 

How can I get a buy-to-let property?

There are two primary ways to purchase a buy-to-let property: by paying for it outright or through a buy-to-let mortgage. Unless you’re absolutely rolling in cash, you’ll likely go down the buy-to-let mortgage route and borrow the majority of the required funds. 

A buy-to-let mortgage is different from residential mortgages, as it’s solely related to buying a property with the intent of renting it out to tenants. Both mortgage types are similar in terms of the process, but they differ when it comes to how much you can borrow and the lending requirements. Residential mortgages are primarily based on the amount you earn, while buy-to-let mortgages factor in how much the property can potentially achieve in rent. 

Buy-to-let lending requirements

Lending requirements change for a buy-to-let mortgage depending on the lender. However, there are some aspects that stay more or less the same, no matter who you borrow with. As a rule of thumb, you can get a buy-to-let mortgage if: 

  • You’d like to invest in property
  • Earn at least £25,000 per year
  • Have a deposit of between 15 and 25% loan to value (LTV)
  • The property you want to buy has a rental income of at least 125% of the mortgage repayment
  • You haven’t been declared bankrupt of have any CCJ
  • Have a decent credit score
  • Are within the lender’s age limit
  • Already own your home (unless the mortgage lender specifies otherwise). 

Interest-only mortgages for buy-to-let

The majority of buy-to-let mortgages are offered interest only. This is so you can maximise the amount of rent (passive income) received each month. With an interest-only mortgage, you pay back the interest rather than the amount borrowed. As a result, your monthly repayments are much lower. 

How does that look in practice? 

If you borrow £150,000 at a 1.15% on a repayment mortgage, your payments will look like this:

Deposit amount £50,000 (75% LTV)
Amount borrowed £150,000 (1.15%)
Monthly rental income£900
Monthly mortgage payment £645
Profit on rent after mortgage deductions £255
Yearly profit£3,060

Now, let’s say you borrowed £150,000 interest-only at 1.15% interest for a property worth £200,000. 

Deposit amount £50,000 (75% LTV)
Amount borrowed £150,000 (1.15%)
Monthly rental income£900
Monthly mortgage payment £145
Profit on rent after mortgage deductions £755
Yearly profit£9,060

*These are estimates only. You also need to factor in elements like tax payable and outgoings related to the property, such as service charges. 

You can see that there’s a significant difference between how much you’d make with an interest-only mortgage in comparison to a repayment one. 

So how do I pay back an interest-only mortgage?

Good question. When you borrow an interest-only mortgage, the lender will ask how you plan to pay back the cost of the loan. Most borrowers say they will do it through the sale of the property, in the hope that its value has appreciated over the 25-year mortgage term (most properties tend to rise in value, though this is by no means a given). 

During the length of the mortgage term, you can sell the property at any stage, paying back the full cost of the loan and using the rest as profit (if it’s increased in value). However, you can also remortgage onto a longer term once the initial rate is over if you don’t want to sell the property. 

How to find a buy-to-let property

As well as financing your buy-to-let property, you’ll also need to find one that you think is a suitable investment. Many people start their search on property portals, such as Rightmove and go from there. 

Deciding on a property depends on several factors, such as how much it will earn in rent (the yield) along with its potential to increase in value (capital appreciation). Some property searchers prefer to buy closer to their home, while others are happy to cast their net further afield in the hope of finding the best all-round deal. 

Before making an offer on a property, make sure you do your research and look at factors like overall house prices in the area, how much homes go on the rental market for and price growth over the last five years. Rightmove is helpful for finding this type of information, as it provides property data details. 

You should also consider aspects like transport in an area, local amenities like restaurants, bars, shops and even gyms. Evaluate things that appeal to people and what would make an area desirable to live in, as you’ll need to attract renters to the property once it goes on the lettings market. 

Different types of buy-to-let

Buy to let

They say that variety is the spice of life, and fortunately there is more than one buy-to-let option available. The most traditional form of buy-to-let sees you buying a property and renting it out to a tenant. The majority of buy to lets fall under this category, and see you purchasing the property as an individual. 


Along with individual purchase, some landlords opt to buy their property as a Special Vehicle Purchase (SPV). This is otherwise known as buying a property through a limited company (ltd). There are some tax differences between an SPV and individual purchases, and we’ve covered everything you need to know about them in a previous article


HMO stands for house of multiple occupation and sees you renting out the rooms in a property to different tenants as opposed to the whole property to one tenant. HMO properties require a different type of buy-to-let mortgage than individual buy to lets. 

Let to buy

Let to buy sees you renting out your home to move into another one. It’s sort of like a reverse of buy to let, as the intention is to find you a new residential home, rather than focus on investing. You convert your current residential mortgage into a buy to let and rent out your home and then take out a new residential mortgage on your next home. 

Portfolio landlord

Otherwise known as a professional landlord, a portfolio landlord has several buy-to-let properties (often five or more) and rents them all out. In theory, it’s no different to individual buy-to-let, other than the fact that all your properties are taken into account together if you take another buy-to-let mortgage. 

Final thoughts: your buy-to-let checklist

There’s a lot to consider before you purchase a buy-to-let property. But once your finances are in order and you’ve found somewhere to buy, you can start your journey to becoming a landlord and making passive income while hopefully seeing the value of your buy-to-let increase in value in the long term. Do that, and you’re already on your way to being a successful buy-to-let landlord.  

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