As tenant demand recovers after the pandemic, it is believed that rents will increase by up to 2% this year and, coupled with the stamp duty extension, this means that by-to-let (BTL) property will become an increasingly attractive investment proposition. Traditionally BTL mortgages have called for loan-to-value levels requiring deposits of between 25% and 40%. However, there are an increasing number of BTL mortgages becoming available for investors with deposits as low as 20% or even 15%.

Buying property as an investment is a different ball game to buying a home. The critical factor is the return on your money in terms of rent, less the running and management costs. The goal is an ongoing profit, rather than paying off the mortgage to own the property outright. If you can take out a BTL mortgage on a lower deposit, that may enable you to split your funds between a higher number of properties — which in turn should generate greater profits.

You will find that 15% is the minimum level of deposit required for a BTL loan, and this means the risk of negative equity is fairly low. However, on the downside, a high loan-to-value mortgage often comes with a high price tag in the form of higher interest rates. This, of course, will affect the rate of return that you will be able to achieve on your investment. You will need to do the maths carefully when considering what deposit and which loan to go for.

While it is clearly easier to get a BTL mortgage if you can put down a deposit of more than 25%, there are still a number of mortgages available for borrowers who have only 15% or 20% for the deposit. There is a choice of five-year and two-year fixed-term deals, but the most attractive rates can be found if you are willing to risk a variable rate deal. Obviously, if you can put down a 20% deposit, there will be more choice of mortgages and lenders. And you need to remember that a 15% deposit comes with a significantly higher interest rate attached.

Investing in a buy-to-let property needs to be carefully considered — you need to end up with a rate of return that makes it worth your while. If you are inexperienced in property investment, make sure you talk to a mortgage adviser before taking the plunge.