Investing in a residential buy-to-let property requires a significant upfront deposit. This article explores how much deposit you typically need for a buy-to-let mortgage, and some differences in requirements for individual landlords versus limited company landlords.
Typical Deposit Requirements for Buy-to-Let Mortgages
For buy-to-let mortgages, the minimum deposit is usually around 25% of the property’s value. In other words, most lenders will only lend up to 75% loan-to-value (LTV) on a rental property. The 25% deposit requirement is a general rule of thumb and can vary depending on the lender. Indeed, deposit requirements quite commonly range from about 20% to about 40% of the value of the property [1].
For example, if you are buying a £200,000 rental property, a 25% deposit would be £50,000 upfront. However, some specialist lenders might accept a 20% deposit (£40,000 on a £200,000 property), whereas higher-risk situations might require a 30–40% deposit (£60,000 – £80,000 on a £200,000 property).
Why are buy-to-let deposits so high?
Mortgage lenders generally consider buy-to-let loans riskier than those to owner-occupiers. As a landlord, your ability to pay the monthly mortgage payment relies on rental income, which can fluctuate or stop if the property is vacant or tenants don’t pay. There’s also added complexity if the lender needs to repossess a tenanted property [1].
Most buy-to-let investors put down a deposit of around 25%, as this is the level at which a wide range of mortgage products become available. However, putting down more than 25% can unlock better interest rates, as lenders reserve their lowest rates for lower LTVs. For instance, a 40% deposit (60% LTV) might secure a cheaper rate than a 25% deposit (75% LTV).
Individual Landlords vs Limited Company Landlords: Deposit Differences and Examples
Another consideration for landlords is whether to buy rental property in their personal name or through a limited company. In recent years, limited company buy-to-lets have become popular. Industry data shows that an estimated 70–75% of new buy-to-let purchases were made through limited company structures in 2024 [4]. This trend has been largely driven by tax changes, as individual landlords can no longer deduct their full mortgage interest from their rental income, whereas a company can still treat its full mortgage interest as a business expense, fully offsetting it against rental income [4]. There are now roughly 390,000 active buy-to-let companies in the UK holding about 680,000 rental properties [4].
How do mortgage deposit requirements differ for limited companies?
The baseline deposit expectations are similar, often around 25%, but some lenders are a bit more conservative when lending to companies. Some mainstream buy-to-let lenders prefer not to lend to new limited companies at all, which often ave to deal with specialist lenders. These specialist lenders still commonly require 25% deposits, but in certain cases they may ask for 30% or 35% deposit from a company if the deal is seen as higher risk [2]. Essentially, the required deposit for an individual vs a company might be the same in many cases, but you might find fewer high-LTV options available for companies.
There are also other differences to consider. Buy-to-let mortgages in a company’s name often come with higher interest rates and fees. This is because the pool of lenders is smaller and lenders tend to perceive additional risk or complexity with corporate borrowers. As an example, one major lender’s pricing showed that a five-year fixed rate for an individual borrower with a 25% deposit was about 3.84%, whereas the same product for a limited company was around 4.99%, a difference of 1.15 percentage points [5]. One broker explains that buy-to-let mortgages in personal names often have more favourable terms (lower rates and fees) due to greater competition among lenders for personal business [5]. Additionally, nearly all buy to let lenders to companies require personal guarantees from the companies’ directors. This means that, if your property-owning company fails to pay the mortgage, you are personally on the hook as a director and shareholder of the company. Thus, ultimately the risk is not totally offloaded by using a company.
In terms of affordability assessment, lenders typically require the rental income to cover at least 125% of the mortgage interest payment and sometimes 145%. Some lenders may require 145% rent cover from higher-rate taxpayers, whereas a company, which pays a lower corporation tax rate, might be allowed a 125% cover. The logic is that companies can deduct their full mortgage interest and also pay lower tax on rental income. This nuance means that a company can sometimes borrow slightly more for a given level of rent compared to an individual landlord. But these policies can vary by lender.
Personal vs Limited Company Example
Let’s say two landlords each want to buy a £200,000 rental property, and both have £50,000 (25%) to put down. Alice buys in her own name with a £150,000 mortgage and Bob’s Ltd buys via a company with a £150,000 mortgage. Both mortgages are interest-only. Suppose Alice secures an interest rate of 5% as an individual. Her annual interest would be £7,500. Bob’s company loan might come at, say, 6% interest, making his annual interest £9,000.
Alice’s rental income will be taxed at her personal income tax rate. Bob’s rental profits will be taxed at corporation tax rates, currently 19% or 25% depending on profits. Alice cannot deduct all her £7,500 interest from her rental income due to tax changes. She gets a 20% credit on that interest instead. Bob’s company, however, can deduct the full £9,000 interest as a business expense before paying tax on profits. In this example, Bob’s company pays more interest but might save on taxes (although any dividends Bob receives from the company might increase his personal taxes), whereas Alice pays a lower interest rate but faces a higher personal tax bill on her rental earnings. This simplified scenario illustrates that personal vs company trade-offs involve both mortgage costs and tax impacts. It is wise to consult your mortgage broker and tax advisor when deciding which route is best for your situation.
Conclusion
In summary, expect to have a deposit of at least 25% deposit for a buy-to-let mortgage, but possibly as high as 40%. When it comes to individual vs limited company landlords, the required deposit percentage might be similar, but limited company borrowers should be prepared for more limited availability from specialist lenders slightly stricter terms. Many new landlords (up to 75% of new purchases in 2024) are opting for the limited company route despite the slightly higher deposits and higher interest rates because mortgage interest can be fully deducted from rental income for tax purposes. However, bear in mind that lenders will usually require personal guarantees from directors and that dividends will increase the personal tax bill.
FAQs
Q. What’s the minimum deposit I need for a buy-to-let mortgage?
A. Most mainstream lenders ask for around 25 % of the purchase price (75 % LTV) and some stretch to 30–40 % on higher-risk cases. Putting down more than 25 % can unlock cheaper interest rates.
Q. Why do buy-to-let lenders demand larger deposits than residential lenders?
A. Rental income can fluctuate, including due to void periods and tenant defaults, and repossessing a tenanted property is more complex. Lenders offset the extra risk by asking for larger deposits, typically in the 25%-40% range.
Q. Do limited-company landlords need a bigger deposit than individual landlords?
A. The headline figure is often the same (about 25 %) but limited-company borrowers have fewer high-LTV options and may be asked for 30–35 % on specialist deals.
Q. Will putting down a larger deposit get me a better mortgage rate?
A. Dropping into a lower LTV band (e.g., 60 % instead of 75 %) can shave a noticeable margin off the interest rate, reducing both monthly payments and overall borrowing costs.
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