Buy to Let Mortgage Calculator: Check Your Borrowing Power

Quick answer

Buy-to-let lenders decide the maximum loan from the rent, not your salary: monthly rent must usually cover 125% to 145% of the mortgage interest, stress-tested at around 5.5%. On a £150,000 interest-only loan that means rent of roughly £859 to £997 a month, plus most lenders want a 25% deposit.

What a buy-to-let mortgage is (and why it's different)

A buy-to-let (BTL) mortgage is a loan secured against a rental property. The key difference from a residential mortgage is that lenders don't primarily care about your salary - they care about whether the rent will cover the loan repayment.

Here's the principle: if you buy a £250,000 property and borrow £200,000, the lender wants to see that the monthly rent is high enough that even if interest rates spike, you can still service the debt. This is called the rental cover requirement or the stress test, and it's the main constraint on how much you can borrow.

A typical lender will stress-test at 5.5% interest, even if the current rate is 4%. So if you're borrowing £200,000 on a 25-year term, your monthly repayment at 5.5% would be roughly £1,266. The lender will insist the monthly rent is at least 125% of that (or sometimes 130%), to leave a safety margin for void periods, maintenance, and insurance. That means you'd need a monthly rent of at least £1,583 - an annual rent of £19,000.

This is much more restrictive than a residential mortgage. Your own income barely matters; what matters is the property's income.

How the calculator works

The buy-to-let mortgage calculator uses four inputs:

• Property price: the purchase price of the rental property.
• Deposit amount: the cash you're putting in (expressed as a percentage, e.g. 25%, or as a fixed amount, e.g. £50,000).
• Annual rental income: the gross rent you expect to collect per year (the calculator uses this to work out the maximum loan lenders will offer).
• Loan term: how many years you'll repay the loan (typically 20–25 years for buy-to-let).

The formula works like this:

1. Subtract the deposit from the property price to get the loan amount needed.
2. The lender applies a stress test: assume the interest rate is 5.5% (or your chosen stress rate), and calculate the monthly repayment using the standard amortisation formula.
3. Divide the monthly rent (annual rent ÷ 12) by the monthly repayment. This gives the rental cover ratio.
4. If the ratio is below 1.25× (or 1.30×, depending on the lender), the loan is flagged as not meeting affordability. The calculator will then tell you the maximum loan amount that would meet the stress test given your rental income.
5. The result shows: the loan amount, your deposit, the mortgage term, the stress-tested repayment, the rental cover ratio, and whether you meet the lender's threshold.

The stress-test formula (calculating max loan from rental income):

If the rental cover ratio must be at least 1.25×, then:

Maximum loan = (Monthly rent × 1.25 × 12 months) ÷ (Annual repayment per £1 at 5.5%)

The annual repayment per £1 of loan is derived from the mortgage amortisation formula. For a 25-year term at 5.5%, it's roughly 0.0584 per year (or £58.40 per year per £1,000 borrowed). So if you have £18,000 annual rent:

Max loan = (18,000 ÷ 12 × 1.25) ÷ 0.0584 per year ≈ £320,000

If the property costs £400,000, you'd need a deposit of at least £80,000 (20%) to meet the lender's rental-cover threshold.

Worked example: a buy-to-let in Manchester

You're a first-time landlord. You've found a flat in Manchester for £225,000. You have £50,000 saved for a deposit (22.2%). You expect to collect £12,000 rent per year (£1,000 per month).

Step 1: Loan amount needed
£225,000 − £50,000 = £175,000

Step 2: Stress-test the repayment
Loan: £175,000
Term: 25 years
Stress rate: 5.5%
Annual repayment = £175,000 × 0.0584 = £10,220
Monthly repayment = £10,220 ÷ 12 = £851.67

Step 3: Rental cover ratio
Monthly rent: £12,000 ÷ 12 = £1,000
Rental cover ratio = £1,000 ÷ £851.67 = 1.17×

Step 4: Does it meet the stress test?
The lender requires a 1.25× ratio. Your ratio is 1.17×, so this loan fails the affordability check. The lender will not offer you £175,000 on this rental income.

Step 5: Maximum loan you can actually get
Rearranging: Max loan = (£1,000 × 1.25 × 12) ÷ 0.0584 = £257,510
So you can borrow a maximum of £257,510. To buy the £225,000 flat, you only need £175,000, so you would qualify - but only if you increased your deposit to £50,000 or the rent rose to £13,000+ per year. In this example, the rent is the constraint.

What you'd actually do: Either negotiate a lower purchase price (say £215,000), or find a property in an area where rents are higher (e.g. a student-let or a house-share in a busier area). Or wait until interest rates fall and lenders relax the stress-test rate from 5.5% to 5.0% - that alone would ease the affordability threshold.

Interest-only vs repayment mortgages for landlords

Most residential mortgages are repayment: you pay interest plus capital each month, and the loan is fully paid off at the end of the term.

Many landlords use interest-only mortgages: you pay interest only, and at the end of the term, you still owe the full capital. You must have a plan to repay it (typically by selling the property, or from other savings).

Interest-only pros and cons:

• Pro: lower monthly payment, improving your rental cover ratio and making it easier to pass the lender's stress test. On a £175,000 loan at 5.5%, interest-only is roughly £9,625 per year (£802/month), vs £10,220 for 25-year repayment.
• Con: you owe the full £175,000 at the end. You're relying on capital growth or a sale. The taxman also views this differently (see Tax on buy-to-let rentals, below).
• Con: lenders are now stricter about interest-only. Many require you to prove you have a credible exit plan and sufficient other income or assets to cover the capital repayment at the end.

For this calculator, choose

The rent test on a £150,000 interest-only BTL (5.5% stress rate)

Model the tax side with the Section 24 calculator and rental income tax calculator, check the deal stacks up with rental yield, and read GOV.UK on renting out property.

Who should use this calculator

Buy-to-let lending works on different rules from residential, and this reflects them. Lenders assess the rent rather than your salary, typically requiring rental income to cover 125–145% of the mortgage interest at a stressed rate — the interest cover ratio. That test, not your income, is usually what limits the loan.

Most buy-to-let mortgages are interest-only, which keeps monthly payments low but leaves the capital outstanding at the end. Combined with the tax treatment of landlord mortgage interest and the additional-property stamp duty surcharge, the returns are considerably tighter than the headline yield suggests.

What this calculator assumes

• Borrowing is constrained by the interest cover ratio at a stressed rate, not by personal income.
• An interest-only structure is assumed by default, as is standard for buy-to-let.
• The rate entered holds for the term, though buy-to-let products are usually fixed for two to five years.
• Deposits are typically at least 25%, and rates improve at lower loan-to-value.

Limitations — what it does not cover

• Section 24. Landlords can no longer deduct mortgage interest from rental income — relief is a 20% tax credit instead, which pushes some higher-rate landlords into paying tax on a loss.
• The additional-property stamp duty surcharge, payable on top of standard rates.
• Void periods, letting fees, maintenance, insurance and safety certificates — see the rental yield calculator.
• Capital Gains Tax on eventual sale, with no Private Residence Relief.
• Limited company structures, which many landlords now use and which are taxed entirely differently.
• Licensing and EPC requirements, which vary by council and are tightening.