Monthly mortgage payment
£859
Interest-only
Monthly cashflow
£641
Rent minus mortgage, before costs and tax
Loan amount
£187,500
75% loan-to-value
Interest coverage (ICR)
128%
Passes 125% (basic-rate) but not 145% (higher-rate) at 7.5%
How buy-to-let mortgages differ from residential
- Bigger deposits. 25% is the usual minimum, and the sharpest rates sit at 40% deposit and above.
- Usually interest-only. You pay only the interest each month and repay the loan when you sell or remortgage, which keeps cashflow high.
- Assessed on the rent, not just your salary. Lenders run an interest coverage ratio (ICR) test: the rent must cover 125% of the interest at a stressed rate for basic-rate taxpayers, or 145% for higher-rate taxpayers and most limited companies. The stress rate is typically the higher of your pay rate plus 2% or 5.5%.
- Higher rates and fees. Expect a premium over residential rates and arrangement fees that are often a percentage of the loan rather than a flat amount.
Reading the results
Monthly cashflow here is rent minus the mortgage payment only. A realistic picture also needs insurance, maintenance, letting fees, voids and tax. Our rental yield calculator handles the running costs.
ICR is the number to watch when you apply. If it comes in below 125% at the stress rate, most lenders will offer a smaller loan than you asked for, which means finding a bigger deposit. Increasing the rent, lowering the price or raising the deposit all improve it.
Don't forget the upfront costs: stamp duty on an additional property is 5% more than on a main home. Work it out with the stamp duty calculator.
Frequently asked questions
What deposit do I need for a buy-to-let mortgage?
Most lenders want at least 25% of the purchase price, and the best rates usually start at 40% deposit (60% loan-to-value). A handful of lenders go to 20%, but rates are higher and the rent has to work harder to pass the stress test.
What is the interest coverage ratio (ICR)?
ICR is the lender’s affordability test for buy-to-let. They take the monthly interest on the loan at a stressed rate (typically the higher of your pay rate plus 2% or 5.5%) and require the rent to cover 125% of it for basic-rate taxpayers, or 145% for higher-rate taxpayers and most limited companies. If the rent falls short, the lender reduces the amount they will lend.
Should I choose interest-only or repayment?
Most buy-to-let mortgages are interest-only because it maximises monthly cashflow and the interest element is what qualifies for tax relief. Repayment builds equity every month but with a much higher payment. Many landlords take interest-only and overpay when it suits them.
Can I get mortgage interest relief on a buy-to-let?
Individual landlords no longer deduct mortgage interest from rental income. Since April 2020 you get a 20% tax credit on the interest instead, which is worth less to higher-rate taxpayers. Limited companies can still deduct interest as a business expense, which is why many landlords now buy through a company.
Does this calculator include running costs?
No, cashflow here is rent minus the mortgage payment only. Use our rental yield calculator to factor in insurance, maintenance, letting fees and voids, and the stamp duty calculator for your upfront buying costs.
More free tools
Lender criteria vary: stress rates and ICR thresholds shown are typical, not guaranteed. These tools give estimates for research purposes and are not financial, tax or mortgage advice. See our terms.
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