Buy-to-Let Affordability
Buy-to-let mortgage lenders do not assess affordability the same way as residential mortgage lenders. Instead of your income, they focus on whether the rental income covers the mortgage at a stressed interest rate. Most lenders require rental income to be 125–145% of the mortgage payment, calculated at a notional stressed rate (typically 5–6%). This calculator tells you whether your proposed purchase passes the standard lender stress test.
Why this matters
Many landlords are surprised to find that a property with strong rental income does not pass the lender's stress test. Understanding the calculation before viewing properties saves wasted time and aborted transactions.
Key points
- Standard lender requirement: rental income must equal 125–145% of mortgage at stressed rate
- The stress rate used varies by lender but is typically 5–5.5% for personal ownership
- Higher-rate taxpayers are often assessed at 145% coverage due to the Section 24 tax impact
- ICR (interest coverage ratio) is the key metric lenders use for buy-to-let affordability
- Deposits of 25–40% are typically required; larger deposits improve affordability assessment
- Portfolio landlords (4+ mortgaged properties) are assessed more stringently under PRA rules
Frequently asked questions
What is the rental coverage ratio for buy-to-let mortgages?
Most lenders require rental income of 125–145% of the mortgage interest at a stressed rate (usually 5–5.5%). So if your mortgage at the stress rate would cost £600/month, you need rental income of at least £750–£870/month.
Do lenders assess personal income for buy-to-let mortgages?
Some lenders require a minimum personal income (often £25,000 per year) to access buy-to-let products, but the primary affordability assessment is based on rental income coverage. A small number of lenders offer 'no minimum income' products.
What is a portfolio landlord and how are they assessed differently?
A portfolio landlord is defined as owning four or more mortgaged buy-to-let properties. Since 2017, the PRA requires lenders to assess the full portfolio's financial position, not just the individual property. This adds complexity and may affect how much you can borrow.
How does the stress rate affect how much I can borrow?
A higher stress rate reduces the maximum loan you can achieve at a given rent. For example, at 5% stress rate with 125% ICR requirement, a property renting at £1,000/month supports a maximum loan of around £200,000.