Becoming a landlord: The essential guide to first time landlord mortgages

Key Takeaways

• Higher deposits: First-time landlords typically need a deposit of at least 25% for a Buy to Let mortgage.
• Income assessment: Borrowing limits are usually based on the property's expected rental income (Interest Coverage Ratio) rather than your personal salary.
• Specialist mortgages: Specific products exist for renting to family members (Family Buy to Let) or keeping your current home while buying a new one (Let to Buy).
• Legal Compliance: Landlords must ensure an EPC rating of E or higher, annual gas safety checks, and electrical inspections every five years.
• Safety requirements: You are legally required to provide smoke alarms on every floor and ensure all furniture meets fire safety regulations.

How to get a mortgage as a first time landlord

One of the first (and biggest) decisions you’ll need to make is what type of mortgage to get. Your mortgage can have a huge impact on the profitability of your investment, so it’s important to shop around and compare Buy to Let mortgage rates before submitting an application.

Before diving into the different mortgage types, it’s worth understanding that like any investment, becoming a landlord comes with risks, including:

• Rental voids: The property may sit empty for periods of time, which can impact the ability to cover mortgage payments.
• Property value fluctuations: The value of the investment could go down as well as up.
• Interest rate changes: If the mortgage is on a variable or tracker rate, rising interest rates could increase monthly repayments.

Please note: Tax rules for Buy to Let landlords can change, potentially affecting rental income and overall returns.

Here’s a breakdown of the main types of Buy to Let mortgages:

Standard Buy to Let mortgage

If you’d like to buy a property and rent it out to tenants, you’ll usually need a standard Buy to Let mortgage (unless you can afford to buy it in cash). To get a standard Buy to Let mortgage, you’ll usually need a deposit of at least 25% of the property’s value, higher than the traditional 10% or even 5% required for a standard residential mortgage.

How much you can borrow for a mortgage usually depends on the amount of rent you can expect to earn from the property, rather than your income - this is called interest coverage ratio. On top of that, the lender will typically look at a few other things:

• A good credit score
• A minimum personal income (often around £25,000, though this varies by lender)
• Evidence that the expected rental income will cover the mortgage payments by a comfortable margin

Learn more: Buy to Let vs residential mortgage. What’s the difference?

Renting to your family

If you’d like to rent your property out to family members, you’ll need to get a Family Buy to Let mortgage. This is different from a standard Buy to Let in that it’s regulated by the Financial Conduct Authority (FCA), and normally has tighter requirements than a standard Buy to Let. Like with a standard Buy to Let, you’ll need to put down a larger deposit than if you were buying the same property through a standard residential mortgage.

Even when renting to family, it's a good idea to treat the arrangement professionally. That means having a formal tenancy agreement in place that sets out expectations around rent, maintenance responsibilities, and notice periods. It might feel awkward, but it protects everyone involved and can actually help avoid uncomfortable conversations down the line.

In some cases, a new mortgage might not be necessary at all if you’re planning on renting out just a room in your home. The Rent a Room scheme lets you earn up to £7,500 per year tax-free from letting out furnished accommodation in your home. This is halved if you share the income with your partner or someone else.

Rent out your current home and move into a new one

If you’d like to move house without selling your existing property, a Let to Buy mortgage could be the answer. With Let to Buy, you’ll technically have two mortgages: one mortgage on the property you rent out and another on the new property you’ll live in.

Let to Buy is a popular option for those looking to earn a passive income from property. But it’s also a lifeline for homeowners who want to move but are struggling to sell their current home aka ‘accidental landlords’. This can happen when a property has been on the market for a while, or when someone needs to relocate quickly for work or family reasons.

To get a Let to Buy mortgage, you’ll usually need to have an idea of how much you’re able to charge tenants when letting out their current property. Lending criteria differs from one lender to another, but it may be harder to get a Let to Buy mortgage if the amount of rent you can charge won’t cover the mortgage payments.

Read more: What is mortgage affordability and how does it work?

Protecting your tenants and your investment

You’ll have a number of responsibilities as a landlord, whether you’re renting your property to strangers or loved ones. For example, you’ll need to carry out regular safety checks (or hire a professional to do them for you) to reduce the risk of fire and other dangers.

It's also worth getting the right landlord insurance in place. A standard home insurance policy won't cover a rental property, so landlords will need a specialist policy that typically includes buildings insurance, landlord liability cover, and protection against loss of rental income. If something goes wrong, like a burst pipe or a tenant injury, the right insurance can be the difference between a minor inconvenience and a major financial hit.

Here’s a quick breakdown of your main health and safety responsibilities. These measures can protect your tenants and help you avoid damage to your property and expensive consequences.

EPC rating

As of 1st April 2020, you can be fined £4,000 for providing a rental property that doesn’t achieve at least an Energy Performance Certificate (EPC) rating of E or above.

Each EPC is valid for ten years. Once a property has been bought, it’s important to find out how long is left on the certificate. If it’s due to expire soon, you’ll need to pay for an inspection from an accredited assessor.

It’s worth noting that the government has previously proposed raising this minimum to a C rating for new tenancies, so it’s a good idea for landlords to keep an eye on any upcoming changes.

Gas safety

If the property has a gas supply, you’ll need to get a gas safety certificate each year. This can cost between £50 to £200 and must be provided by a tradesperson on the Gas Safe Register. A copy of the certificate will need to be given to tenants before they move in, and every time it’s renewed.

Electrical safety

You’ll also need to hire a qualified electrician to carry out an Electrical Installation Condition Report (EICR) every 5 years. A copy of the report must be given to new tenants before they move in, and to existing tenants within 28 days of the inspection.

Fire and appliance safety

You have several legal obligations regarding fire safety:

• Smoke alarms: At least one smoke alarm must be fitted on each storey of the property.
• In England, landlords must also install a carbon monoxide alarm in any room that has a fixed combustion appliance, such as a gas boiler or wood-burning stove (gas cookers are excluded). These alarms should be tested at the start of each new tenancy.
• Appliances: You must ensure all provided electrical appliances (e.g., fridges, washing machines) are safe for use.
• Furniture: All furniture and furnishings provided must comply with the 1988 Fire Safety regulations (excluding curtains and carpets).
• Inventory: Provide a thorough inventory to distinguish your appliances from the tenant's own belongings.

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