Your buy-to-let deposit affects more than the amount you need to borrow. It sets the loan-to-value, influences lender choice and mortgage pricing, and can affect how easily the expected rent supports the borrowing.
A larger deposit usually means a lower loan-to-value. That can strengthen the mortgage position, but it also ties up more cash in the property. The right balance depends on the expected rent, purchase costs, cash reserves and your wider investment plans.
Before choosing your buy-to-let deposit
LTV
Work out your loan-to-value
Your deposit determines the loan-to-value, which can affect the amount available, lender choice and mortgage products.
RENT
Check the rent supports the loan
A larger deposit can help, but the expected rent still needs to meet the lender’s rental calculation for the mortgage requested.
CASH
Keep money back for costs
Using more cash for the deposit can leave less available for property tax, fees, repairs, insurance and periods without tenants.
PLANS
Think beyond this purchase
If you plan to buy again, keeping some cash available may matter as much as reducing the mortgage on this property.
What LTV means for buy-to-let
Loan-to-value, or LTV, shows the mortgage as a percentage of the property’s value.
If you buy a property for £250,000 and borrow £187,500, the mortgage is 75% LTV and the deposit is £62,500.
Example
Amount
Property value
£250,000
Mortgage amount
£187,500
Deposit
£62,500
Loan-to-value
75%
If you are comparing different property values or deposit amounts, you can calculate the loan-to-value before testing the wider buy-to-let borrowing.
A lower LTV means you are borrowing a smaller proportion of the property’s value. A higher LTV means the lender is taking more exposure to the property, which can narrow the mortgage options available.
Figures are illustrative only. Actual borrowing, rates, payments and lender criteria depend on the property, expected rent, deposit, mortgage product and your circumstances.
How much deposit do you need?
A 25% deposit is a common starting point for buy-to-let, which means borrowing at 75% LTV. However, deposit requirements vary between lenders and some higher-LTV options may be available.
Higher-LTV buy-to-let mortgages usually come with a narrower lender choice and can involve tighter criteria. How lenders assess landlords can also depend on the expected rent, property type, credit profile, experience and ownership structure.
You may also need a larger deposit if the rent does not support the borrowing you want, the property falls into a more specialist category or the lender applies stricter criteria to the case.
What do the numbers look like?
Test the borrowing, expected rent and potential yield before deciding how much deposit to use.
How deposit size affects your mortgage
Changing the deposit changes more than the mortgage balance. It can affect pricing, lender choice and the rental calculation.
Mortgage amount
A larger deposit reduces the amount you need to borrow and can lower the monthly mortgage cost.
Rental stress test
Lower borrowing can make it easier for the expected rent to support the mortgage under the lender’s calculation.
Rates and products
Some lenders price products by LTV band, so moving into a lower band can change the mortgage options available. Current mortgage rates can help you compare how pricing differs across available products.
Cash left after completion
Putting more into the deposit leaves less cash available for fees, repairs, void periods and other landlord costs.
Higher LTV or larger deposit?
There is usually a trade-off between keeping more cash available and reducing the mortgage.
HIGHER LTV
Keep more cash available
A higher LTV means using less of your own money upfront. That can preserve cash for improvements, costs or another purchase.
However, lender choice can be narrower, the mortgage may cost more and the rent may need to work harder against the borrowing.
LARGER DEPOSIT
Reduce the amount you borrow
A larger deposit lowers the loan-to-value and may widen lender choice, improve pricing or make the rental calculation easier to pass.
However, more of your cash becomes tied up in one property and less remains available for the wider investment.
WORTH KNOWING
The biggest deposit you can afford is not automatically the strongest deposit. The mortgage and your remaining cash position both need to work.
Ways to improve your deposit position
If your LTV is higher than the lender is comfortable with, there may be ways to strengthen the position before applying.
Add more cash to the deposit
Increasing the deposit reduces the mortgage amount and may move the application into a lower LTV band.
Use equity from another property
Some landlords release equity for a buy-to-let deposit, subject to affordability, loan-to-value and lender criteria on the existing property.
Revisit the purchase price
A lower agreed purchase price reduces the borrowing needed and can improve the loan-to-value for the same cash deposit.
Build the deposit before buying
Waiting may allow you to increase the deposit while still keeping a separate reserve for purchase and landlord costs.
If you are buying your first rental property, first-time landlord costs can include property tax, mortgage and legal fees, repairs, insurance and periods without tenants.
How Muttuo Mortgages can help
Deposit and loan-to-value can change which buy-to-let mortgages fit. We can review the property, expected rent and cash position together before you apply.
Review your planned deposit and loan-to-value
Compare buy-to-let mortgage options from more than 100 lenders
Check how the expected rent and remaining cash buffer affect the overall plan
Check your deposit position
Explore buy-to-let mortgage options and how your deposit, rent and loan-to-value could affect what is available.
Your property may be repossessed if you do not keep up with your mortgage repayments.
The Financial Conduct Authority does not regulate some buy-to-let mortgages.
Your buy-to-let deposit questions answered
How much deposit do I need for a buy-to-let mortgage?
A 25% deposit is a common starting point, but lender requirements vary. Some higher-LTV products may be available, while specialist properties or cases with weaker rental coverage may require a larger deposit.
What does loan-to-value mean on a buy-to-let mortgage?
Loan-to-value shows the mortgage as a percentage of the property value. For example, a £187,500 mortgage on a £250,000 property is 75% LTV.
Can I get an 80% LTV buy-to-let mortgage?
It may be possible with some lenders. An 80% LTV mortgage means providing a 20% deposit. Lender choice can be narrower at this level, and the expected rent, property, applicant profile and ownership structure still need to meet lender criteria.
Does a lower LTV mean a better buy-to-let rate?
It can. Some lenders offer different products and rates at different LTV bands. However, the final mortgage option also depends on the lender, property, expected rent and wider application.
Can a bigger deposit help with the rental stress test?
Often, yes. A larger deposit reduces the mortgage amount, which can make it easier for the expected rent to support the borrowing under the lender’s rental calculation.
Should I use all my savings for the deposit?
Not necessarily. A larger deposit can improve the mortgage position, but you may still need cash for property tax, legal fees, mortgage costs, repairs, insurance and periods without tenants.
