How buy-to-let affordability works
Lenders check that the monthly rent covers the mortgage interest by a set margin at a stressed interest rate. The maximum loan is the annual rent divided by the ICR multiplied by the stress rate.
Why stress rates vary
Five-year fixed rates often qualify for a lower stress rate. Some lenders allow 'top slicing' using personal income to support a shortfall.
Frequently asked questions
What is a 125% ICR?
It means the rent must be at least 125% of the mortgage interest calculated at the lender's stress rate. It typically applies to limited company borrowers and basic-rate taxpayers.
Why do higher-rate taxpayers face 145%?
Because mortgage interest relief for individual landlords is restricted to a basic-rate tax credit, lenders build in a larger margin for higher-rate taxpayers.
Can I borrow more than the rent supports?
Some lenders allow top slicing with your personal income, or lower stress rates on 5-year fixes. A broker can find the best fit.
Important: Most buy-to-let mortgages are not regulated by the FCA. Your property may be repossessed if you do not keep up repayments, and a receiver of rent may be appointed.