How buy-to-let affordability works
Most lenders apply interest cover ratio (ICR) stress tests: 125% for limited companies and basic-rate taxpayers and 145% for higher-rate taxpayers.
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.
Living overseas? Read our non resident buy to let mortgage page for how lenders treat landlords abroad, including the 2% stamp duty surcharge.
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.