Buying your first rental property is an exciting step, but a buy-to-let mortgage works very differently from the one on your own home. Here is what a first-time landlord needs to understand before taking the plunge, from the deposit you will need to the responsibilities that come with being someone's landlord.

How a buy-to-let mortgage is different

Most buy-to-let mortgages are interest only, so your monthly payments cover just the interest and the full loan is repaid when you eventually sell or refinance. They usually come with higher interest rates and larger fees than residential deals, and lenders assess them mainly on the rent the property can earn rather than on your salary. Many first-time landlords are surprised by how much this changes the sums.

How much deposit you will need

As a rule, expect to put down at least 25% of the property's value, although a few lenders will consider around 20%. A larger deposit tends to unlock lower rates, and that matters more here because the interest is central to how the whole deal is assessed.

How lenders decide what you can borrow

Rather than a simple income multiple, lenders apply a rental cover test, sometimes called the interest coverage ratio. They want the expected rent to comfortably exceed the mortgage payment, typically by 125% to 145%, and they check this against a higher notional interest rate to make sure the numbers still work if rates rise. If the rent falls short, you may need a bigger deposit or a smaller loan.

The upfront costs to budget for

Stamp duty is the big one. In England, buying an additional property means paying a 5% surcharge on top of the standard stamp duty rates, a change that came in on 31 October 2024, and it applies to purchases above £40,000. On top of that, plan for arrangement fees, valuation costs and legal fees. Our stamp duty calculator guide can help you estimate the bill before you commit.

Your responsibilities as a landlord

Letting a property comes with legal duties that have grown in recent years. Energy efficiency rules are tightening: rental homes currently need an EPC rating of E or above, and from October 2030 that minimum rises to C, so it is worth checking a property's rating before you buy. The rules around tenancies have changed too, so it pays to understand what they mean for your plans. You will also be responsible for gas and electrical safety, protecting your tenant's deposit and keeping the property fit to live in. Our guides on EPC ratings and your buy-to-let and the Renters' Rights Act go into more detail.

Should you buy in your own name or through a company?

This is one of the first big decisions, and the right answer depends on your tax position and how many properties you plan to own. Buying through a limited company can change how the profit is taxed, but it brings its own costs and added complexity. We weigh up the trade-offs in our guide to buying in your own name or through a limited company.

Don't forget the tax picture

Rental income is taxable, and since the Section 24 changes you can no longer deduct your mortgage interest from that income. Instead you receive a 20% tax credit, which can leave higher-rate taxpayers with a larger bill than they expected. Because everyone's situation is different, it is sensible to speak to an accountant or tax adviser before you buy so there are no surprises later.

Ready to take the first step?

Becoming a landlord is a big decision, and getting the mortgage right sets the tone for everything that follows. Our advisers can walk you through the numbers, compare lenders and help you feel confident about your first buy-to-let. Get in touch to talk it through.