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How Do I Buy an Investment Property With No Deposit?
Thinking of becoming a landlord but worried about the upfront costs?
You’re not alone.
For many first-time and aspiring investors, one question stands out: how can I buy an investment property with no deposit?
It might sounds too good to be true, but there are real and legal strategies that can help you buy an investment property with no money down (or at least with a much smaller deposit than usual).
Keep reading to discover how to get started with limited savings and make your first property investment.
How Much Deposit is Needed For a Buy-to-Let Mortgage?
For standard buy-to-let mortgages in the UK, lenders usually ask for a deposit of 20% to 40%, with 25% being the average.
That’s a considerable chunk of change, especially if you’re buying in high-demand areas like Liverpool, London, or Manchester.
But what if you don’t have 25% lying around?
Can you still get into property investing?
Can You Buy Investment Property With No Money Down?
Yes, in some cases, you can become an investor and buy an investment property with no money down. But this is not through conventional mortgage routes.
It requires creative planning and possibly partnering with others.
Here are the top ways people in the UK are buying investment property with little or no deposit:
1. Use a Joint Venture (JV) or Investor Partner
If you don’t have a deposit, someone else might.
A joint venture allows you to team up with an investor who brings the money, while you manage the property or deal.
2. Consider Vendor Finance (aka Seller Financing)
With vendor finance, the seller agrees to be paid in instalments.
You gain control of the property without a traditional mortgage, and often with one upfront deposit.
This isn’t widely advertised, so networking with motivated sellers or distressed landlords is key.
3. Look Into Lease Options
A lease option gives you control of a property with the option to buy later, often without a deposit.
You rent the property, generate income, and build towards a future purchase. It’s one of the best ways to buy investment property with no deposit, especially for investors building portfolios with minimal capital.
4. Leverage Existing Equity
Already own a property? You may be able to release equity and use it as a deposit for a buy-to-let. This is a common strategy among seasoned investors.
Tip: Speak to a mortgage broker about refinancing or releasing equity without triggering penalties.
5. Use a Gifted Deposit or Inheritance
Lenders accept gifted deposits, typically from family members, as long as they’re documented.
If you’ve recently inherited funds, that can also be used as a deposit without affecting your eligibility.
How Do You Qualify for a Buy-to-Let Mortgage?
Even if you’re trying to use no (or little) money down, lenders still want reassurance that you’re a responsible borrower. Here’s what you’ll generally need:
- Be over 18 (some lenders cap at 75)
- Have a clean credit history
- Ideally earn £25,000+ annually
- Rental income to cover at least 125% of monthly interest payments
- A solid property plan or portfolio
What Types of Deposits Do Lenders Accept?
Although there are many ways to raise the capital for your deposit, you can’t just turn up with money out of thin air and expect them to accept it.
You have to prove where the money came from, and this is the determining factor in whether or not you get accepted.
Here are acceptable sources:
| Where is the deposit coming from? | Meaning |
|---|---|
| Your own personal savings | Money that you’ve saved up yourself in a separate account |
| A gifted deposit | Money gifted to you by loved ones close to you such as parents, grandparents, or siblings |
| Selling another property you owned | You’ve sold another home and used income from that to put this new deposit down |
| A loan from your family | One of your family members takes out a loan for your deposit |
| Your inheritance money | Where you use money left behind from the passing of your parents to put a deposit down |
| A builders deposit | A financial benefit that builders can offer you to lower your purchase price if they can offer value through their work |
| A release of equity | Releasing equity in your own home to use as a deposit on an investment property |
| An unsecured loan | A loan that doesn’t require collateral to borrow money in order to put a deposit down on a home |
| Your redundancy pay | The money you get after you get dismissed from your job can be used as a deposit. |
Note: Lenders may decline deposits from unverified or high-risk sources; always check first.
How to Get the Lowest Buy-to-Let Mortgage Deposit Possible
There isn’t much to this, apart from the fact that you need to:
- Raise as much money as you can from any of the sources above
- Speaking to experts within the field on how you can make this work
- Make your application for the buy-to-let mortgage flawless
Although goalposts can’t be moved much in this instance, there are still ways you can get the best deals with mortgage brokers, using letting agents in your local area, and other property experts.
It’ll just make sure you have everything in place so there are no silly costs involved that you didn’t realise you were going to be paying. Peace of mind, as it’s called.
How Using a Buy-to-Let Mortgage Calculator Can Help
A buy-to-let mortgage calculator can help you get an estimate of:
- What the property you can rent out will be worth
- How much your mortgage payments can be
- Whether or not the property is affordable for your initial deposit
Barclays Bank does a brilliant job with their buy-to-let mortgage calculator, which should give you a great insight into how much you can borrow for a rental property.
Remember, individual circumstances are always different, and that’s why it’s always worth speaking to an expert for tailored advice on your personal situation before jumping into it.
So, Can You Really Buy a Property with No Deposit?
The short answer is yes, but not in the traditional way.
To buy an investment property with no money down, you’ll need to think creatively, build strong relationships, and understand the risks and rewards. If you’re new to this, check out our blog on how to start investing in property for more help.
Or, if you’re ready to invest today, speak to our team at Peninsular Property for honest and expert advice on building your portfolio with minimal upfront costs.
FAQs For Buy-to-Let Mortgages
There are so many questions to look at when applying for a buy-to-let mortgage and that’s why, with the frequently asked questions, we’re going to try and simplify them as much as possible:
The minimum deposit you can put down for an investment property is 20%. However, most of the time, you’re going to be looking at more like 25% to put down on your buy-to-let mortgage. If you can consult with an expert; however, they may be able to help you get that 80% LTV you desire.
There are certainly ways you can get a 100% loan-to-value (LTV) buy-to-let mortgage, but first of all, it’s extremely unheard of that lenders will allow for this to happen, and second of all, it’s usually not a very good financial decision to do so.
In simple terms, you can’t live in your buy-to-let property if it was purchased with a buy-to-let mortgage. This could be considered as mortgage fraud, as you were the one who said you wanted to rent it out. This could result in legal issues such as penalties, fines, and potentially even imprisonment.
It can be, especially if you’re over-leveraged. Always do your due diligence and plan for void periods or unexpected costs.
Yes, some lenders offer fixed-rate buy-to-let mortgages even if your deposit is smaller than usual, but the rates might be higher compared to larger deposits.
Locking in a fixed rate can provide clarity of your monthly payments and protect you from interest rate rises.
However, lenders typically prefer larger deposits for fixed-rate deals, so it’s important to shop around and get expert advice to find the best option for your situation.
