How rental cover works
Buy-to-let lenders usually size the loan from the rent rather than your salary. They require the annual rent to be a set percentage of the mortgage interest, the interest cover ratio, worked out at a stress-test rate that's often higher than the rate you'll actually pay.
Ratios of 125% are common for basic-rate taxpayers and limited companies, and 145% for higher-rate taxpayers, but each lender sets its own.
Worked example
With rent of £1,250 a month (£15,000 a year), a 125% cover ratio and a 5.5% stress rate, the maximum loan is about £218,181.82. At 145%, it falls to about £188,087.77.
Other limits
Lenders also cap the loan-to-value, often at 75%, and look at your wider finances, so the loan you're offered may be lower.
This is an estimate. Lenders make their own decision based on your full circumstances and credit history.
Inputs for the BTL loan to rental income calculator
Expected monthly rent
The rent you expect, ideally from a letting agent's valuation.
Interest cover ratio
How much the rent must exceed the mortgage interest. Often 125% or 145%.
Stress-test interest rate
The rate the lender uses for the test, often higher than your actual rate.
CALCULATOR QUESTIONS
BTL loan to rental income calculator questions
How much can I borrow for buy-to-let?
Usually based on rent: annual rent divided by the cover ratio and the stress-test rate. Enter your figures above.
What is an interest cover ratio?
The percentage by which the rent must exceed the mortgage interest, such as 125% or 145%.
Why is the stress rate higher than my rate?
Lenders test whether the rent would still cover the interest if rates rose.
Is this a guarantee?
No. Lenders also check loan-to-value and your circumstances.