Glossary
BTL: Buy-to-let
Buying a property to rent out to a single household on a tenancy.
What it means
Buy-to-let is the classic landlord strategy: buy a home, let it to one household on an assured shorthold tenancy (or the equivalent in Scotland and Northern Ireland), and earn rent while the mortgage is paid down. Buy-to-let mortgages are lent on the rent as much as on your income, so the interest cover test matters as much as the deposit.
Worked example
ExampleA £150,000 semi let at £950 a month with a 75% interest-only mortgage at 5.5%.
- Loan
- £150,000 × 75% = £112,500
- Monthly interest
- £112,500 × 5.5% ÷ 12 = £516
- Rent less interest
- £950 − £516 = £434 before other costs
After management, repairs and voids of around £180, it clears roughly £250 a month.
Information, not advice. Example figures are fictional and for illustration only.