Can You Get A BTL Mortgage With A Low Deposit? | moneyfacts.co.uk

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Derin Clark

Derin Clark

Online Reporter
Published: 18/03/2021

The stamp duty extension, together with a report from the Royal Institution of Chartered Surveyors (RICS) that found a high likelihood of rents increasing by just over 2% later this year due to an increase in tenant demand, makes buy-to-let (BTL) an attractive investment opportunity for many investors.

While BTL has been traditionally popular for those with a large deposit, with many BTL mortgages available at 60% loan-to-value (LTV) and 75% LTV, which require a 40% and 25% deposit respectively, potential BTL investors with smaller deposits are not shut out of the market, as there are mortgages available at lower deposits of 20% and even 15%.

Should you use a low deposit to purchase a BTL?

Unlike a residential property when most buyers’ end goal is to pay off the mortgage and own the property outright, with a BTL many buyers have no interest in paying off the mortgage or fully owning the property – instead most BTL investors earn returns on rent and any profits made when they sell the BTL property. As such, it may be more attractive for investors to pay a lower deposit that enables them to split their funds between several properties rather than putting a higher deposit on one or two BTLs.

As BTL mortgages usually require a minimum of a 15% deposit (85% LTV), there is not a high negative equity risk if house prices fall. Saying this, those considering a lower deposit on a BTL should factor into their rental yield calculations the fact that interest rates at 80% or 85% LTV will usually be higher than 60% or 75% LTVs.

What BTL mortgages are available with a 20% deposit?

A number of lenders offer BTL mortgages for those with a 20% deposit who would need an 80% LTV. In our 80% BTL mortgage chart, Molo Finance currently dominates, offering some of the most competitive rates at 80% LTV. Its most competitive rate is 3.29%, which is available on both five and two year fixed deals. For those happy to forgo the security of locking into a fixed deal, Loughborough Building Society offers a lower rate of 3.15% discounted variable on a deal that has a two-year term.

Can you get a BTL mortgage with a 15% deposit?

There are fewer BTL mortgages available for those with a 15% deposit who would need an 85% LTV mortgage. In our two and five year BTL charts, just Kensington offers mortgages at 85% LTV, with the most competitive rate 5.34% fixed for two years and 5.54% fixed for five years.

BTL mortgage borrowers looking to purchase a property with a 15% deposit should consider speaking to a mortgage broker who may be able to recommend specialist lenders offering BTL mortgages at 85% LTV, although these may charge even higher rates than the ones available in our charts.

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