How the buy-to-let mortgage calculator works
Buy-to-let lenders decide how much to lend mainly on the rent the property will earn, not on your salary. They use an interest cover ratio (ICR) test: the yearly rent must be a set percentage higher than the yearly mortgage interest, worked out at a "stress rate" that is usually above the rate you'll actually pay.
Maximum loan = yearly rent ÷ (ICR × stress rate)
The calculator uses whichever is higher, your rate or the stress rate. It then shows your actual monthly payment on both interest-only and repayment so you can see the cash flow each way.
The rules lenders follow
The Bank of England's Prudential Regulation Authority sets the minimum standards in its supervisory statement on buy-to-let underwriting (SS13/16). The main points are:
- Lenders must test affordability at a minimum interest rate of 5.5% for the first five years, and allow for rates rising by at least 2 percentage points. Fixed rates of five years or more can be tested closer to the actual rate, which is why five-year fixes often let you borrow more.
- The PRA notes the industry standard minimum ICR is 125%.
- Lenders must allow for the landlord's tax. Because individual landlords can't deduct mortgage interest from rent and get only a 20% tax credit instead (Section 24), many lenders ask higher-rate taxpayers for 145%. Limited companies can deduct interest, so they are usually tested at 125%.
Most buy-to-let mortgages also need a deposit of at least 25%, so the maximum loan is often capped at 75% of the price whatever the rent.
Worked example: £250,000 buy-to-let with 25% deposit
- Loan: £250,000 − £62,500 = £187,500 (75% loan-to-value)
- Interest-only at 4.5%: £187,500 × 4.5% ÷ 12 = £703.13 a month
- Repayment over 25 years: £1,042.19 a month
- Stress test at 5.5% and 125%: £187,500 × 5.5% × 1.25 ÷ 12 = £1,074.22 rent needed
- Rent of £1,200 a month gives cover of 139.6%, so it passes at 125% and the rent would support a loan of up to £209,455
- At 145% the rent needed rises to £1,246.09, so the same deal fails. The maximum loan falls to £180,564, meaning a deposit of about £69,400 instead
Rent needed by loan size
Monthly rent needed at a 5.5% stress rate:
| Loan | ICR 125% | ICR 145% |
|---|---|---|
| £100,000 | £573 | £665 |
| £150,000 | £859 | £997 |
| £200,000 | £1,146 | £1,329 |
| £250,000 | £1,432 | £1,661 |
Interest-only or repayment?
Most landlords choose interest-only because the payment is much lower and the rent goes further. In the example it leaves about £497 a month before costs compared with £158 on repayment. The catch is that you still owe the full £187,500 at the end, so you are relying on selling the property or on other savings to clear it. The interest-only mortgage calculator shows how much you'd need to put aside each month to repay it.
Other costs to budget for
- Stamp duty at the higher rates: an extra 5% on every band in England and Northern Ireland, so £20,000 on a £300,000 buy-to-let.
- Arrangement fees, which on some buy-to-let deals are a percentage of the loan rather than a flat fee.
- Letting agent fees, insurance, repairs and empty weeks. Check the real return with the rental yield calculator.
Frequently asked questions
How much rent do I need for a buy-to-let mortgage?
Typically the yearly rent must be 125% to 145% of the interest at a stress rate of around 5.5%. For a £150,000 loan that means £859 a month at 125%, or £997 at 145%.
How much can I borrow for buy-to-let?
Divide the yearly rent by the ICR times the stress rate. Rent of £1,200 a month at 125% and 5.5% supports a loan of up to £209,455, though most lenders also cap the loan at 75% of the property's value.
Why do higher-rate taxpayers need 145% rental cover?
Individual landlords can't deduct mortgage interest from rent and get only a 20% tax credit, so higher-rate taxpayers keep less of the rent. Lenders allow for this by asking for more rent per pound of interest.
What deposit do I need for a buy-to-let mortgage?
Most lenders want at least 25% of the purchase price, which is why buy-to-let loans are usually capped at 75% loan-to-value. A few lenders accept 20%, usually at higher rates. A bigger deposit generally gets a lower rate.
Are buy-to-let mortgages interest-only?
Most landlords choose interest-only, which keeps payments low, but you still owe the whole loan at the end of the term. Repayment buy-to-let mortgages are also widely available.
Last reviewed October 2026 using 2026/27 figures. This calculator gives an estimate for guidance only.