Is It Possible?
Yes, you can take out a secured loan against a buy-to-let property, though the choice of lenders is more limited than for residential properties. Some specialist second charge lenders specifically cater to landlords, offering products designed for investment properties.
The loan works in the same way as a residential secured loan — a second charge is placed on the property behind your existing buy-to-let mortgage. The funds can be used for various purposes, including property improvements, purchasing additional properties, or consolidating personal debts.
How It Differs from Residential Secured Loans
Buy-to-let secured loans are assessed differently from residential ones. Lenders typically focus on the rental income generated by the property as well as your personal income. They may require a higher level of equity — often a maximum CLTV of 75% to 80% rather than the 85% to 90% available on residential properties.
Interest rates tend to be slightly higher to reflect the additional risk that investment properties carry. The application process may also require more documentation, including rental income evidence, tenancy agreements, and details of your wider property portfolio if you are a multi-property landlord.
What Lenders Look For
Lenders will assess the rental coverage ratio — typically requiring rental income to be at least 125% to 145% of the combined mortgage and secured loan payments. They will also consider your personal income, credit history, and experience as a landlord.
If you own multiple buy-to-let properties, you may be classified as a portfolio landlord (four or more mortgaged properties), which triggers additional scrutiny under PRA rules. Some secured loan lenders welcome portfolio landlords, while others restrict lending to borrowers with fewer properties.
Using the Funds
Common reasons for taking a secured loan on a buy-to-let include funding improvements to increase rental value, raising a deposit for another investment property, or consolidating debts. Some landlords use secured loans to carry out essential repairs or energy efficiency upgrades required to meet EPC regulations.
If you are using the funds to grow your portfolio, consider whether the returns from the new property will comfortably cover the additional borrowing costs. A specialist buy-to-let broker can help you model the numbers and find the right lender for your situation.
Important: Your home may be repossessed if you do not keep up repayments on your mortgage. There will be a fee for mortgage advice. The actual rate available will depend on your circumstances. Think carefully before securing other debts against your home.