How much deposit do I need for a buy-to-let property?

Key takeaways

• Buy-to-let mortgages require a bigger deposit than residential mortgages

• A bigger deposit will mean a lower loan-to-value (LTV) and therefore better mortgage rates

• Some property types or mortgage deals will require a bigger deposit

• Buy-to-let mortgage rates tend to be higher than on residential mortgages

• The bigger your buy-to-let deposit, the lower your monthly payments will be

What is a buy-to-let deposit?

A buy-to-let deposit is the lump sum you pay upfront when purchasing a rental property with a buy-to-let mortgage. It works in the same way as a residential deposit, but the required percentage of the property price is usually much higher.

• Residential deposits often start around 5%–10%.

• Buy-to-let mortgage deposits typically range from 20% to 40%, with 25% being the most common minimum.

• The higher deposit reflects the greater risk to lenders: rental income is not guaranteed, the property may sit vacant at times, and landlords face additional legal and maintenance responsibilities.

Typical buy-to-let deposit percentages

Most lenders ask for a minimum deposit between 20% and 40% depending on your financial situation, the property, and expected rental income. Here are some examples:

A smaller deposit means a higher loan-to-value (LTV) ratio, which increases risk for the lender. You should expect stricter checks on rental income and affordability if you want a low-deposit deal.

What affects the deposit requirement?

Several factors influence how much deposit you’ll need for a buy-to-let mortgage. These include:

Credit score and financial history

The mortgage lender will look at your credit history when you make a mortgage application. A strong credit profile may allow a lower deposit. Poor credit typically means you’ll need more cash upfront to reduce the lender’s risk and meet the eligibility criteria - you may also have to pay higher interest rates.

Rental income and rental stress tests

Buy-to-let mortgages work in a different way to residential mortgages. Instead of assessing affordability based on your income, lenders assess whether the expected rent comfortably covers the mortgage repayments. They will usually expect the rent to be 125% to 145% of the monthly repayment.

If rental income is borderline, the lender may ask for a larger deposit to lower the mortgage amount.

A mortgage broker can help you find the best buy-to-let mortgage deal for your needs.

Property Type

Higher deposits are often required for:

• Flats above commercial units

• New builds

• HMOs (houses in multiple occupation)

• Holiday lets

• Properties in need of refurbishment

Individual vs. limited company landlords

Limited company buy-to-let mortgages can allow more flexible tax treatment, but sometimes require higher deposits and involve stricter underwriting.

First-time landlords

Some buy-to-let mortgage lenders ask for a bigger deposit if you are a first-time buyer or have no prior landlord experience.

What is loan-to-value (LTV)?

LTV represents the percentage of the property value you borrow.

• A 75% LTV mortgage = 25% deposit

• A 60% LTV mortgage = 40% deposit

Lenders analyse LTV alongside rental yield, because yield determines how easily the buy-to-let mortgage can be covered by rent.

What is rental yield?

Rental yield is a measure of how much income a property generates compared to its value. It helps landlords understand whether a buy-to-let investment is financially worthwhile.

There are two types of rental yield:

• Gross Rental Yield: This shows the annual rent as a percentage of the property’s value.

📌 Formula: (Annual rent ÷ Property value) × 100

• Net Rental Yield: This gives a more accurate picture because it deducts various costs such as maintenance and insurance.

📌 Formula: ((Annual rent – annual costs) ÷ Property value) × 100

Lenders use rental yield to assess whether a buy-to-let property is affordable, and landlords use it to compare different investment opportunities.

In general, higher yields indicate better income and usually easier buy-to-let mortgage approval, while lower yields are viewed as higher risk and may require a bigger deposit for a mortgage.

How does deposit size affect monthly payments?

The size of your deposit has a direct impact on how much you borrow and, therefore, how much you pay each month.

A larger deposit reduces the loan amount, which typically leads to lower monthly mortgage payments and often access to better interest rates.

This can make it easier to pass lender affordability checks and improve your cash flow as a landlord.

In contrast, a smaller deposit increases the loan-to-value ratio, resulting in higher monthly repayments and potentially stricter lending criteria.

Here’s an example:

Scenario A: 25% deposit - Property price: £250,000 - Deposit: £62,500 -Mortgage: £187,500

Monthly repayment (5% interest, interest-only mortgage): ~ £781

Scenario B: 40% deposit - Property price: £250,000 - Deposit: £100,000 - Mortgage: £150,000

Monthly repayment (5% interest, interest-only mortgage): ~£625

Your mortgage advisor can help you work out how much different deposit amounts will affect your monthly payments. MoneySuperMarket’s mortgage calculators can also help.

How to raise your buy-to-let deposit

There are several common ways landlords fund their deposit:

• Savings: The simplest and most common option.

• Credit card: A high risk option as you will be taking on more debt.

• Equity release from your home: You can remortgage your residential property to release equity that can be used as the buy-to-let deposit.

• A joint investment or partnership: Entering into property investment with a partner or investor can reduce individual contributions to the property portfolio.

• Using company structures: Some landlords form a limited company to hold properties, which may help with tax but doesn’t reduce the cash needed upfront.