Buy-to-let vs residential mortgage — what's the difference?
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In short. A residential mortgage is for a home you live in; affordability is based on income. A buy-to-let mortgage is for a property you rent out; affordability is based on rental coverage and is mostly unregulated by the FCA.
Lenders apply very different rules to BTL and residential lending. BTL is treated as a business, with higher deposits, interest cover tests (ICR) and a different tax regime. Living in a BTL-mortgaged property without consent is mortgage fraud.
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Side by side
Who lives there
Buy-to-let mortgage
Tenants
Residential mortgage
You / your family
Typical minimum deposit
Buy-to-let mortgage
20–25% (sometimes higher)
Residential mortgage
5–10% (FTB) or higher
Affordability test
Buy-to-let mortgage
Interest Cover Ratio (rent must cover 125–145% of interest at stressed rate)
Residential mortgage
Income multiples + affordability assessment (MMR rules)
Regulation
Buy-to-let mortgage
Mostly unregulated by FCA (except 'consumer BTL')
Residential mortgage
Fully regulated by FCA
Repayment type
Buy-to-let mortgage
Usually interest-only
Residential mortgage
Usually repayment
Stamp Duty (England/NI)
Buy-to-let mortgage
Standard rates + 5% additional-property surcharge
Residential mortgage
Standard rates; FTB relief possible
Tax on rental profit
Buy-to-let mortgage
Income Tax on profit; mortgage interest is a 20% basic-rate tax reducer (not a deduction)
Residential mortgage
N/A — no rental income
When Buy-to-let mortgage usually wins
- You want a property as a long-term investment / rental business
- You can fund a 20–25% deposit
- You understand and can manage landlord obligations (deposit scheme, EPC, gas safety, Right to Rent etc.)
- You're comfortable with mostly interest-only repayment
When Residential mortgage usually wins
- You're buying a home to live in
- You want lower deposit options and FCA protection
- You want full repayment of capital over the term
- You may qualify for first-time buyer reliefs
Related quick answers
FAQ
- Can I move into my buy-to-let?
- Not without 'consent to let' or moving to a residential mortgage. Living in a BTL-mortgaged property breaches the loan terms and may be treated as mortgage fraud.
- How is mortgage interest taxed for landlords?
- Since April 2020 individual landlords can't deduct mortgage interest as an expense — they get a 20% tax reducer instead. This can push higher-rate landlords into a less favourable position than under the old rules.