Buy-to-let mortgage calculator
A buy-to-let mortgage is sized by the rent, not your salary. Lenders apply a rental cover test (the ICR): the monthly rent must cover the mortgage interest at a stressed rate, typically by about 125% for basic-rate and limited-company landlords or 145% for higher-rate taxpayers (lender practice; the regulator sets the 5.5% minimum stress rate). The maximum loan the rent supports is the annual rent divided by the stress rate times the ICR. At £1,200 rent, a 5.5% stress and 145% ICR, that is about £180,000, subject to a loan-to-value cap of around 75%.
How the rental cover test works
A buy-to-let lender does not start from your income. It checks that the rent will cover the mortgage interest with a safety margin, calculated at a stressed interest rate rather than the pay rate. That margin is the interest coverage ratio (ICR). Turn the test around and it gives you a maximum loan:
Maximum loan = (monthly rent × 12) ÷ (stress rate × ICR)
Worked example
Take a higher-rate-taxpayer landlord expecting £1,200 a month in rent, a lender using a 5.5% stress rate and a 145% ICR. The annual rent is £14,400. Divide it by 0.055 × 1.45 (0.07975) and the rent supports a maximum loan of about £180,564. If the property is worth £250,000, the 75% loan-to-value cap (£187,500) sits just above that, so here the rent is the binding constraint. On a basic-rate or limited-company basis at 125% ICR the same rent would stretch to about £209,455.
Scenario table
Indicative maximum loan supported by the rent, at a 5.5% stress rate. The 75% loan-to-value cap may bite first on a lower-value property.
| Monthly rent | 125% ICR (basic-rate / limited company) | 145% ICR (higher-rate taxpayer) |
|---|---|---|
| £1,000 | £174,545 | £150,470 |
| £1,250 | £218,182 | £188,088 |
| £1,500 | £261,818 | £225,705 |
| £2,000 | £349,091 | £300,940 |
Indicative only, using the 5.5% minimum stress rate from the PRA's supervisory statement SS13/16. The 125% and 145% ICRs are typical lender practice, not regulation. Actual stress rates, ICRs and LTV caps vary by lender and by fixed-rate term, and some lenders top-slice with personal income. Not a quote and not advice.
Check it for real
Run your own figures
The table above shows the method. Use this buy-to-let calculator to run your own rent and property value. This is an embedded third-party tool run by Propillo, not by Mortgage Explained. Anything you enter is collected by Propillo under its own privacy policy. Information, not advice, and no obligation.
Where the numbers move
- Your tax position. Many lenders apply a tougher ICR, often around 145%, to higher-rate taxpayers, so the same rent supports less. Many landlords buy through a limited company (SPV), assessed at 125%.
- The fixed-rate term. Some lenders stress five-year fixes at a lower rate, which can lift the maximum loan noticeably.
- Top-slicing. Where the rent falls short, a lender that top-slices can use your personal income to bridge the gap. Not all do.
- Property type. An HMO or holiday let is assessed differently again.
Common questions
How is buy-to-let borrowing worked out?
Not on your income, but on the rent. A buy-to-let lender applies a rental cover test (the interest coverage ratio, or ICR): the monthly rent must cover the mortgage interest, calculated at a stressed rate, by a set margin. Rearranged, the maximum loan the rent supports is the annual rent divided by the stress rate times the ICR. A separate loan-to-value cap, usually around 75%, also applies, and the lower of the two sets your maximum.
What is the ICR and why is it 125% or 145%?
The interest coverage ratio is the margin by which rent must exceed the stressed interest. It reflects your tax position. The PRA, in its supervisory statement SS13/16, describes a 125% minimum ICR as the current industry standard; it does not set a 145% figure. In practice lenders commonly use around 125% for basic-rate taxpayers and limited-company landlords, and around 145% for higher-rate taxpayers, because higher-rate landlords keep less of the rent after tax. The 145% band is lender practice, not a regulatory requirement. A higher ICR means the same rent supports a smaller loan.
What stress rate do lenders use?
The PRA sets a floor in supervisory statement SS13/16: for the rental test, PRA-regulated lenders (banks and building societies) should assume a borrower interest rate of at least 5.5% over the first five years. That five-year stress does not apply in the same way where the rate is fixed for five years or more, which is why some lenders use a lower stress on five-year fixes. Each lender sets its own rate above the floor. The stress rate is usually higher than the actual pay rate, which is why a property that cashflows in real life can still fail the test on paper.
Does my own income matter for a buy-to-let?
Often yes, as a gate rather than the main test. Many lenders want a minimum personal income (frequently around £25,000) and some will top-slice, using surplus personal income to support a loan the rent alone would not quite cover. Portfolio landlords face extra checks. A broker will know which lenders top-slice and which judge the rent in isolation.
New to it? Start with the buy-to-let mortgages hub, or work out the yield first with the rental yield calculator.
Founder, MortgageExplained
Adam spent over eight years as a mortgage adviser at Just Mortgages, with further experience in commercial finance. He is CeMAP and CF qualified. He built MortgageExplained to do one thing well: explain mortgages in plain English, so you know where you stand before you speak to a regulated broker. Every page on the site is written by Adam.
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