Buy-to-let mortgages in Northern Ireland

Deposit and rates

Expect to need a 25% deposit for most buy-to-let products, with a few lenders going to 20%. Rates are higher than residential, and most landlords choose interest-only so the monthly cost is lower and the capital is repaid when the property is sold or refinanced.

The rental cover test

Lenders check that the expected rent comfortably exceeds the mortgage interest at a stressed rate. A typical test is rent of at least 125% of the interest for a limited company or basic-rate taxpayer, and 145% for a higher-rate taxpayer, calculated at a notional rate that is often above the actual pay rate. The lender's valuer confirms the rent. Where the rent falls short, some lenders allow "top-slicing" with surplus personal income.

Personal name or limited company?

Since mortgage interest relief for individual landlords was restricted to a 20% tax credit, many landlords, particularly higher-rate taxpayers and those building a portfolio, buy through a special purpose vehicle (SPV) limited company. Interest is a deductible expense for the company, and profits are subject to corporation tax rather than income tax. Against that: company mortgage rates are typically a little higher, there are accountancy costs, and moving existing properties into a company triggers stamp duty and possibly capital gains tax. Get tax advice before deciding; the broker then sources the right kind of lender for the structure you choose.

Buy-to-let mortgages to limited companies, and most buy-to-let lending generally, are not regulated by the FCA. Family buy-to-let (letting to a close relative) is regulated and needs a lender set up for it.

Stamp duty on buy-to-let

Buying an additional residential property costing £40,000 or more adds a 5% surcharge to every SDLT band. That makes the combined rate 5% on the first £125,000, 7% up to £250,000 and 10% up to £925,000. On a £150,000 rental property that is £8,000 of stamp duty. Run the figure before you offer.

Being a landlord in Northern Ireland

Register with the Landlord Registration Scheme before letting.
Protect the tenant's deposit in an approved scheme within 28 days.
Provide a tenancy information notice and the required safety certificates.
Houses in multiple occupation (HMOs), common near Queen's and the Ulster University campus, need a licence from Belfast City Council and a mortgage from a lender that accepts HMOs.

Refinancing an existing rental

Landlords often remortgage a property that has risen in value to release the deposit for the next one. The same rental cover test applies at the new loan amount. A broker can look at the portfolio as a whole, because some lenders limit how many mortgaged properties you can hold with them or in total.

Common questions

Can a first-time buyer get a buy-to-let mortgage in Northern Ireland?

A few lenders allow it, usually with a larger deposit and stricter checks, because they want to be sure you are not going to live in it. It is harder than a standard buy-to-let and a broker will know which lenders to approach.

How much rent do I need for a £120,000 buy-to-let mortgage?

As a rough guide, at a 5.5% stress rate and 125% cover you would need around £690 a month; at 145% cover, about £800. Actual tests vary by lender, and the lender's valuer decides what rent is achievable.

Is limited company buy-to-let always better?

No. For a basic-rate taxpayer with one or two properties the extra rate and accountancy costs can outweigh the tax saving. It tends to win for higher-rate taxpayers and larger portfolios. Take tax advice first.

Do I pay the stamp duty surcharge if it's my only property?

No. The 5% surcharge applies when you'll own more than one residential property at the end of the day of completion. If the rental property is the only one you own, standard rates apply.