Rent vs Mortgage Payment
The simplest check on any buy-to-let is whether the rent exceeds the mortgage payment — and by how much. The interest coverage ratio (rent ÷ mortgage payment) tells you both how much headroom you have after the mortgage and whether you pass the lender's own affordability test. This calculator computes the monthly surplus or shortfall and the coverage ratio.
Why this matters
A buy-to-let where rent barely covers the mortgage has almost no margin for costs, voids, or rate rises. Most lenders require rent to cover at least 125% of the mortgage at a stressed rate — but many landlords operate with margins well below this in practice.
Key points
- Interest coverage ratio (ICR) = monthly rent ÷ monthly mortgage interest payment
- Lenders typically require ICR of 125% (basic rate taxpayers) or 145% (higher rate)
- A coverage ratio below 130% leaves little margin for costs, voids, and rate rises
- As mortgage rates rise at renewal, the coverage ratio decreases — model future scenarios
- Some lenders use the actual rate; others stress test at a notional higher rate
- A property where rent barely covers the mortgage is vulnerable to any cost increase
Frequently asked questions
What interest coverage ratio do buy-to-let mortgage lenders require?
Most lenders require an interest coverage ratio of 125% for basic-rate taxpayers and 145% for higher-rate taxpayers. This means rent must be at least 1.25x or 1.45x the monthly mortgage interest at a stressed rate (typically 5–5.5%). Some lenders are more flexible; some are stricter.
What is a healthy rent vs mortgage ratio for a buy-to-let?
A ratio above 150% is considered comfortable — it leaves room for management fees, insurance, maintenance, and occasional voids. A ratio of 125–140% is the minimum required by most lenders but leaves little margin. Below 125% means the property is likely to make a cash flow loss.
What happens if my rent falls below my mortgage payment?
You have a negative cash flow — you must fund the shortfall from personal income each month. This is unsustainable long-term unless capital growth is significant. If it happens unexpectedly (e.g. a tenant leaves and the property re-lets at a lower rent), review your entire cost structure.
Should I fix my mortgage rate to protect the coverage ratio?
Fixing your rate removes uncertainty from the coverage ratio calculation. A 2–5 year fix at a known rate allows confident cash flow forecasting. Variable or tracker rates create uncertainty — model worst-case rate scenarios when assessing a property at today's rates.