Investment Property Mortgages

If you’re planning to purchase an investment property, choosing the right type of finance is a key part of the process. Here, we explain how investment mortgages work, the different types of loans for investment properties, how lenders assess applications, and where to find the best deal for your investment mortgage.

What types of mortgages are there for investment properties?

There are several different types of investment property mortgages available in the UK. The right option for you will depend on how the property will be used and your long-term plans.

Buy-to-let (BTL) mortgages

Buy-to-let mortgages are the most common type of investment mortgage. These are designed for landlords purchasing residential property to rent out to long-term tenants. Buy-to-let mortgage lenders usually assess your:

• Expected rental income

• Deposit size

• Experience as a landlord

• Personal income and credit profile

• Existing property portfolio (if you have one)

Most buy-to-let mortgages require deposits of at least 15% to 25%, although some lenders may require more depending on the property type or your experience.

Commercial investment mortgages

Commercial mortgages are usually created on a bespoke basis and are used for investment properties such as:

• Shops and retail units

• Offices

• Warehouses

• Industrial premises

• Restaurants, hotels, or hospitality venues

These mortgages are usually assessed based on the property's rental income, tenant profile, lease terms, and the overall strength of the investment. You can’t typically use commercial investment mortgages for residential letting.

Mixed-use or semi-commercial mortgages

Mixed-use mortgages are designed for properties that combine both a residential and a commercial element, such as:

• Shops with a flat above

• Pubs with owner accommodation

• Commercial premises with residential units attached

Because these properties can be more complex to value and to finance with an investment loan, your lending options are likely to be more limited.

Holiday let mortgages

Holiday let mortgages are designed for investment properties rented out on a short-term basis through platforms such as Airbnb or holiday letting agencies.

These investment mortgages tend to have strict rules on how many weeks or months the property can be rented out for, and lenders often assess applications based on projected seasonal rental income, local demand, and occupancy levels.

Limited company investment mortgages

Some investors will purchase property through a limited company or Special Purpose Vehicle (SPV) structure rather than in their personal name.

Limited company buy-to-let mortgages are particularly common among portfolio landlords and higher-rate taxpayers because of the potential tax treatment of mortgage interest and profits.

However, lending criteria, deposit requirements, and interest rates can differ from those for buy-to-let mortgages, and lenders will usually assess both the company structure and any directors involved in the investment.

Fast property finance

Some investors use buy-to-sell mortgages or shorter-term bridging loans to purchase a property or land quickly (or fund refurbishment projects) before refinancing onto a longer-term mortgage. This can be common for:

• Property flipping

• Auction finance purchases

• Heavy renovation projects

• Unmortgageable or uninhabitable properties

These types of finance are typically more expensive than some other investment property mortgages, but they can offer greater speed and flexibility.

Lending criteria for investment mortgages

Lending criteria for investment mortgages can vary significantly depending on the type of property and lender involved, but common factors include:

Deposit requirements

Most investment property mortgage lenders require larger deposits than standard residential mortgages. Deposits of 20% to 40% are common, depending on:

• The type of investment property

• Your property investment experience

• Rental income projections

• Current market conditions

Rental affordability

For buy-to-let and commercial investments, lenders will usually assess whether the expected rental income comfortably covers the mortgage repayments.

This is often measured using rental stress testing calculations.

Credit profile

Both your personal and business credit history may be reviewed, particularly if you’re borrowing through a limited company or applying for commercial finance.

Investment property experience

Some lenders prefer experienced landlords or investors, especially for larger portfolios or more complex investment properties.

Type of investment property

Certain investment properties can be harder to finance, including:

• Non-standard constructions

• Properties above commercial premises

• HMOs (houses in multiple occupation)

• Semi-commercial buildings

• Properties requiring major refurbishment

How to get an investment mortgage

Getting an investment mortgage usually follows a similar process to applying for other types of property finance. The exact process will vary based on the type of investment mortgage, but here are the typical steps to follow:

1. Speak with a broker: Because investment mortgage lenders can vary significantly in the types of properties they finance, the loan-to-value (LTV) limits they offer, and how they assess affordability, the best approach is usually to speak with an experienced mortgage broker first.

2. Compare your options: Your broker can help identify lenders suited to your type of investment property, personal circumstances, and financial goals. They’ll then compare investment property mortgage lenders across the market to find suitable products, competitive rates, and loans with terms that suit your needs.

3. Submit your application: Once you’ve picked a lender, the application will usually involve affordability checks, property valuations, and underwriting. Depending on the type of investment mortgage, lenders may also perform rental stress testing calculations, review business plans, assess refurbishment costs, or project investment returns before issuing a formal mortgage offer.

If you’d like to compare investment property mortgage deals or discuss your borrowing options, you can get started below.

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Investment property mortgage lenders

Here are a few examples of UK lenders that commonly operate in the investment mortgage market, along with some specific details about how their products and lending criteria work:

• The Mortgage Works: Part of Nationwide Building Society, The Mortgage Works specialises in buy-to-let lending, offering investment property mortgages with LTVs up to 80%. They also offer limited company mortgages for first-time, experienced, and portfolio landlords with a 25% deposit.

• Shawbrook Bank: Offers commercial investment mortgages from £150,000 up to £35 million, with terms ranging from 3 to 25 years and fixed-rate options available over 2, 3, 5, and 10 years. Shawbrook also offers interest-only investment mortgages and lends up to 75% LTV on many commercial and semi-commercial properties.

• Santander: Open to BTL mortgages for both first-time landlords and existing property investors only through mortgage brokers. Santander’s investment mortgage criteria currently include a maximum LTV of 75% on standard BTL properties, a minimum income of £25,000 for at least one applicant, and mortgage terms of up to 25 years.

Other types of finance for a property investment

In some situations, an investment mortgage may not be the only or best option available; other forms of property investment finance you might want to explore with your broker include:

• Bridging loans: Useful for short-term purchases, auctions, or refurbishment projects where speed is important.

• Development finance: Designed for larger renovation projects, conversions, or ground-up property developments.

• Second charge mortgages: Allows you to borrow against equity in an existing property without replacing your current mortgage.

• Commercial finance: Can sometimes be used for larger investment projects or business-related property purchases.

• Remortgaging to release equity: If you already own property, whether that's residential or an existing commercial portfolio, it may be possible to refinance to release equity and use that capital to finance your next investment.

The right type of finance will usually depend on your investment strategy, timeline, and the type of property involved.

Why choose Money Helpdesk for your investment mortgage?

Arranging investment property finance can be more complex than other types of lending, particularly when comparing specialist lenders, factoring in rental calculations, and accounting for different property types.

Here’s why property investors across the UK use Money Helpdesk when arranging investment mortgages:

• Access to experienced investment mortgage advisors

• Comparisons across mainstream and specialist lenders

• Support with complex cases, including unique properties

• Free initial chat with no obligation to proceed further

If you’d like to compare investment mortgage deals or discuss your property investment plans with an experienced advisor, you can get started here.