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What is an investment property loan?
An investment property loan is a type of financing used to purchase or refinance a property that generates income or capital growth. These loans are tailored for landlords, developers, and investors (not homeowners) and are assessed based on the property’s income potential and your investment strategy.
Common uses include:
- Buying residential or commercial rental properties
- Refurbishing for resale
- Converting commercial spaces to residential
- Building or expanding a property portfolio
How do investment property loans work?
Investment property loans can be structured in several ways depending on the lender, property type, and borrower's strategy. They typically fall into one of two repayment types:
Loan types:
- Repayment loans – pay capital + interest monthly
- Interest-only loans – lower payments during term, repaid via sale/refinance
Typical loan terms for residential investment properties:
- Loan-to-Value (LTV): Typically 70% to 80%, though lower-risk borrowers may access higher LTVs
- Loan size: Usually from £50,000 to around £5 million, depending on the property and lender
- Interest rates: Generally range from 5% to 7%, influenced by borrower profile and market conditions
- Term lengths: From 2 to 25 years, with bridging finance available for short-term purchases or refurbishments
For commercial properties:
- Loan-to-Value (LTV): Typically capped at 60% to 75%, depending on the asset type and strength of the tenant or trading business
- Loan size: Can range from £250,000 up to £25 million+, subject to lender appetite
- Interest rates: Usually fall between 6% and 9%, with higher rates for riskier or specialised properties
- Term lengths: From 1 to 25 years, with balloon payments or interest-only structures common for larger loans or investment scenarios
Example: A developer secures a £300,000 interest-only investment property loan at 7% interest per annum. Monthly payments are £1,750. The plan is to refurbish the property and sell within 18 months for £500,000, using the proceeds to repay the capital and realise a profit.
Investment loan eligibility criteria
Lenders assess risk carefully, with eligibility based on deposit size, borrower profile, credit history, property type, and repayment strategy.
Deposit Requirements
- Residential: Typically 20–30% of the property value
- Lower deposits are possible for strong rental yields or additional security
- Commercial: Usually 25–40%
- Higher deposits may be needed for:
- Specialised assets (e.g. hotels, care homes)
- Owner-occupiers with limited trading history
- Weak or no tenant covenants.
- Higher deposits may be needed for:
Borrower Profile
- Property investment or development experience is a big advantage
- First-time investors may face stricter terms or lower LTVs.
Credit Score
A strong credit score enhances your chances of mortgage approval and can secure you more favourable interest rates. Lenders assess your credit history to evaluate how reliably you've managed debts in the past. A higher score indicates lower risk, making you eligible for better mortgage deals.
Credit Score Bands:
- Excellent (961–999): Access to the best mortgage deals with lower interest rates.
- Good (881–960): Eligible for most mortgage deals, though not necessarily the very best rates.
- Fair (721–880): Qualify for mortgage deals but may face higher interest rates.
- Poor (561–720): Limited mortgage options with higher interest rates.
- Very Poor (0–560): Unlikely to be approved for a mortgage without significant improvements to credit history.
For instance, borrowers with excellent credit scores might secure mortgage rates as low as 4.42%, while those with poor credit could face rates around 6.42%, leading to substantial differences in monthly payments.
Property Valuation & Rental Yield
Residential Investments:
- Valued using local sales comparisons and expected rental income
- Yields are benchmarked against local rents
- Lenders stress-test affordability at higher interest rates
- Generally, more flexible and familiar for lenders
Commercial Investments:
- Valuation is more complex and considers:
- Tenant quality and lease terms
- Sector performance (e.g. retail, leisure)
- Covenant strength (tenant financial reliability)
- Owner-occupiers are assessed based on business trading performance
- Affordability is tested against variable income and market conditions.
Exit Strategy
For interest-only or development loans, lenders require a clear plan to repay the capital, usually via sale, refinance, or rental income.
How to get an investment property loan using Brickflow
Finding the right finance for your next property investment is fast and frictionless with Brickflow. Our digital platform connects you with over 100 UK lenders offering investment property loans — from buy-to-let to commercial and development finance.
Here’s how it works:
1. Enter Your Project Details
Tell us about your property type, location, purchase price, and loan purpose (e.g. let, flip, develop). Brickflow instantly searches live loan options based on your strategy.
2. Compare the Market
See real-time finance offers from 100+ specialist lenders. Compare rates, terms, LTVs, fees, and lending criteria — all in one place.
3. Connect with a Broker
Once you find the right deal, we’ll connect you with a vetted broker who specialises in investment finance. They’ll help prepare and position your application for approval.
4. Submit Your Application
Upload documents directly through Brickflow and submit your application with broker support. Get Decisions in Principle (DIPs) within minutes from multiple lenders.
5. Valuation & Legal Checks
The lender conducts underwriting, property valuation, and legal due diligence. Brickflow keeps you updated every step of the way.
6. Complete & Drawdown
Once approved, funds are released, and your investment begins. Your broker helps you navigate the final leg to completion.
What Type of Loan Is Best for an Investment Property?
Selecting the appropriate loan depends on your investment strategy, property type, and financial goals. Here's a breakdown of common loan types with typical rates and terms:
Buy-to-Let Mortgage
- Purpose: Ideal for individual landlords purchasing residential properties to rent out.
- Interest Rates: Typically range from 4.3% to 5.3% for 2- to 5-year fixed deals, depending on the loan-to-value (LTV) ratio and borrower profile.
- Loan Terms: Usually 5 to 25 years.
- LTV: Up to 75%.
- Repayment Options: Interest-only or capital repayment.
Bridging Loan
- Purpose: Bridging loans are suitable for short-term financing needs, such as property purchases, renovations, or bridging gaps between transactions.
- Interest Rates: Typically between 0.55% and 1.5% per month, equating to 6.6% to 18% annually.
- Loan Terms: 1 to 12 months.
- LTV: Up to 75%.
- Repayment: Interest rolled up or serviced monthly; capital repaid at term end.
Development Finance
- Purpose: Development finance is designed for ground-up construction projects or significant refurbishments.
- Interest Rates: Typically range from 0.33% to 1% per month, translating to 4% to 12% annually.
- Loan Terms: 6 to 36 months.
- LTV: Up to 70% of Gross Development Value (GDV).
- Repayment: Interest often rolled up; capital repaid upon sale or refinancing.
Commercial Mortgage
- Purpose: Commercial mortgages are best suited for purchasing or refinancing commercial investment properties (e.g., offices, retail units, warehouses) or for owner-occupiers buying business premises.
- Interest Rates: Typically between 4.5% and 6.5%, influenced by property type, tenant strength, and borrower profile.
- Loan Terms: 5 to 25 years.
- LTV: Up to 75%.
- Repayment Options: Interest-only or capital repayment.
Find the best deal on the market using our commercial mortgage comparison tool.
Costs and fees involved in getting an investment property loan
Understanding the full cost of borrowing upfront is essential when choosing the right investment property loan, something that can be done comprehensively using Brickflow.
Beyond the interest rate, you’ll need to factor in arrangement fees, valuations, legal costs, and potential early repayment charges. Here’s what to expect:
| Loan Type | Interest Rate (Typical) | Notes |
| Residential BTL | 5.5% – 7.5% | Fixed or variable; good availability |
| Commercial Mortgage | 6% – 9% | Depends on lease profile and tenant strength |
| Bridging (Residential) | 0.6% – 1.2% per month | Often interest rolled up; repaid on sale/refinance |
| Bridging (Commercial) | 0.85% – 1.5% per month | Higher risk, higher rates |
| Development Finance | 6% – 10%+ per annum | Drawdown-based; depends on GDV and exit plan |
Additional costs to factor in include:
Arrangement Fees
- Typical Range: £1,000 to £2,000
- Details: This fee covers the lender's administrative costs for setting up the mortgage. Some lenders may charge a percentage of the loan amount, often between 0.5% and 1.5%.
Valuation Fees
- Typical Range: £150 to £1,500
- Details: Lenders require a valuation to ensure the property's worth aligns with the loan amount. Costs vary based on property type, location, and value.
Legal Fees
- Typical Range: £800 to £1,500
- Details: These cover the solicitor or conveyancer's work in handling the legal aspects of the property purchase.
Broker Fees
- Typical Range: £300 to £600
- Details: Some mortgage brokers charge a fixed fee or a percentage of the loan amount for their services. Others may receive commission from lenders instead.
Early Repayment Charges (ERC)
- Typical Range: 1% to 5% of the remaining loan
- Details: If you repay your mortgage early, you may incur an ERC. The exact percentage often decreases over the mortgage term.
How to Find the Best Investment Property Loan
Brickflow is the easiest and most effective way to find the right investment property finance.
As the UK’s leading online comparison platform for commercial, bridging, and development loans, Brickflow gives you access to live offers from over 100 lenders — all in one place.
Whether you're purchasing a buy-to-let, refinancing a commercial unit, or funding a new development, Brickflow gives you full visibility of the market.
Why choose Brickflow?
- Instantly compare investment loan products across the UK market
- Access specialist lenders traditional banks may not offer
- Connect with expert brokers who understand investment strategies
- Save time with a streamlined, fully digital application process
Looking for the best investment property loan in the UK? Start your search with Brickflow today.
What is an investment property loan in the UK?
Who are investment property loans suitable for?
Investment property loans are suitable for:
- First-time investors starting a portfolio
- Experienced landlords or developers
- Limited companies and LLPs investing in property
- High-net-worth individuals seeking long-term growth
- Joint ventures acquiring larger assets
These loans often use interest-only terms to optimise cash flow and allow capital to be reinvested.
How much deposit do I need for an investment property loan?
Most lenders require a deposit of 25% to 40% of the property's value. For residential investments, some lenders may accept 20% deposits if the rental yield is strong. Commercial properties typically require higher deposits due to increased risk.
What interest rates can I expect on an investment property loan?
Rates vary by loan type and risk. As of 2025:
- Buy-to-let mortgages: 4.3%–5.3%
- Commercial loans: 6%–9%
- Bridging loans: 0.55%–1.5% per month
- Development finance: 6%–10% annually
Your credit score, experience, and property type all affect the final rate.
What types of investment property loans are available?
Common options include:
- Buy-to-let mortgages – for long-term residential rentals
- Bridging loans – for short-term purchases or refurbishments
- Development finance – for new builds or heavy renovations
- Commercial mortgages – for retail, office, or mixed-use properties
Each type serves a specific investment strategy.
How does an investment property loan differ from a residential mortgage?
Unlike residential mortgages, which are based on personal income, investment property loans are assessed based on the rental yield or project value. They often have higher interest rates, larger deposits, and may offer interest-only repayment to maximise cash flow.
Can I get an investment property loan as a first-time investor?
Yes, first-time investors can qualify, but lenders will look closely at your business plan, credit history, and exit strategy. Working with a broker and demonstrating strong financial planning can improve your chances.
How do lenders assess affordability for investment property loans?
Lenders assess:
- Projected rental income (for buy-to-let or commercial)
- Property valuation and market comparables
- Borrower experience and creditworthiness
- Exit strategy (for interest-only or short-term loans)
- For commercial assets, tenant strength and lease terms are also key factors.
What fees are involved in getting an investment property loan?
Typical costs include:
- Arrangement fees: 1–2% of the loan
- Valuation: £150–£1,500+, based on asset type
- Legal fees: £800–£1,500+ (borrower + lender)
- Broker fees: £300–£600 (if not paid by lender)
- Possible early repayment charges.
Brickflow allows you to compare all fees upfront.
Where can I compare investment property loans in the UK?
Brickflow is the UK’s leading online platform for comparing investment property loans. It gives you access to over 100 lenders, lets you view live rates, and connects you with expert brokers to help you apply — all in one place.