The Ultimate Guide for First-Time Landlords and Property Investors
Thinking of becoming a landlord or growing your property portfolio? Whether you’re starting with your first rental property or scaling up your investments, this guide walks you through everything you need to know about Buy-to-Let (BTL) mortgages.
Why Invest in Buy-to-Let?
Buy-to-Let remains a popular long-term strategy for building wealth. Here’s why:
- Passive Income: Monthly rental income can cover mortgage costs and generate profit.
- Capital Growth: UK property tends to increase in value over time.
- Portfolio Leverage: Use equity from one property to help buy the next.
- Tax Planning: There may be benefits to buying via a Limited Company (SPV).
- Diversification: Property can balance out a portfolio of stocks or other investments.
Personal vs. Limited Company (SPV) Ownership
You can buy BTL property in your personal name or through a company:
- Personal Name: Simpler structure, suitable for basic-rate taxpayers. However, higher-rate taxpayers may lose out due to restricted mortgage interest relief.
- Limited Company (SPV): Allows full mortgage interest relief and lower corporation tax (19–25%), though dividend tax applies when drawing profits.
Tip: Always seek tax advice before choosing your ownership route.
How Buy-to-Let Lenders Assess You
Lenders look at several key areas:
- Credit Score: Good history = better deals. Blips? Specialist lenders may still help.
- Rental Yield: Most lenders require rental income to be 125–145% of mortgage payments (ICR stress test).
- Income: Many lenders expect £25k+ annual income, especially for first-time landlords.
- Experience: HMOs, MUFBs, and complex cases often require landlord experience.
- Property Type: Flats over shops, small studios, or low EPC ratings can cause issues.
Can You Get a BTL Mortgage with Bad Credit?
Yes – but expect:
- Fewer lender choices
- Higher interest rates
- Larger deposit requirements (30–40% typical)
Use a BTL mortgage broker who understands the specialist market and can position your application correctly.
Market Rates & Outlook for 2025
- Average BTL mortgage rates: ~5–6% (as of mid-2025)
- Longer fixed-rate terms are growing in popularity for stability
- Product availability is broadening again after 2022–2023 market turbulence
- Arrangement fees can be high—compare total cost, not just the rate
Regulations Every Landlord Needs to Know
Capital Gains Tax (CGT)
- Annual CGT allowance reduced to £3,000
- 18% (basic rate) / 28% (higher rate) on property gains
- Must report CGT within 60 days of sale
Renters’ Reform Bill
- No more Section 21 “no-fault” evictions
- All tenancies will be rolling/periodic
- Stronger legal grounds for eviction under Section 8
- Formal limits on rent increases
- Legal right for tenants to request pets
- Mandatory landlord registration and Ombudsman membership
EPC Rules
- EPC rating E is minimum now
- EPC rating C likely to become mandatory by 2025 (new tenancies), 2028 (existing)
Other Legal Requirements
- Electrical Safety Checks (EICR every 5 years)
- Selective & HMO licensing varies by council
- Stamp Duty Surcharge: Additional 5% on BTL purchases
(e.g. £300,000 BTL purchase = approx. £20,000 SDLT)
FAQs
How much deposit do I need for a BTL mortgage?
Typically 25%, though some lenders offer options from 20% for strong applicants.
Can I get a BTL mortgage as a first-time buyer?
Yes, but with fewer lender choices and stricter affordability checks.
Is rental income taxable?
Yes, it’s considered part of your taxable income. Company structures may offer tax advantages.
What are “stress tests”?
Lenders calculate affordability using assumed interest rates and rental coverage ratios (e.g., 145% at 5.5%).
What if I want to rent out my current home?
That’s called Let-to-Buy. You’ll likely need to remortgage or obtain ‘consent-to-let’ from your lender.
Can I invest with bad credit?
Yes, but you’ll need a larger deposit and may pay a higher interest rate. Specialist lenders can help.
Do I need a license?
Some properties or local authorities require landlord licensing. Always check local regulations.
Ready to Invest?
Whether you’re buying your first BTL or expanding your property portfolio, our experienced advisers can help:
- ✅ Search the whole market
- ✅ Access specialist lenders
- ✅ Help with complex cases or bad credit
- ✅ Provide no-obligation advice
📞 Book your free consultation or portfolio review today.
