Buy to Let Rent Calculator
Calculate rental value against a lender’s rental cover test, and see how ICR, stress rates and top-slicing affect what you could borrow.
A buy to let rent calculator checks whether a property’s monthly rent is high enough to pass a lender’s rental cover test, which compares the rent with the mortgage interest worked out at a “stress” rate. Enter the property value, the expected rent, the mortgage amount and the stress rate you want to test, and choose a 125% or 145% ratio. The calculator shows the gross yield, the rental cover your rent achieves and the rent needed to pass. Results are indicative only: each lender sets its own ratios, stress rates and rules.
Rental cover calculator
Enter your own figures. Results are indicative only and are not a mortgage offer or a recommendation.
Enter the stress rate you want to test.
Gross yield is before letting costs, voids and tax.
Calculating rent for a buy-to-let mortgage
Most buy-to-let lenders size the loan on rent rather than on your salary. The basic calculation is:
Rent needed each month = mortgage amount × stress rate ÷ 12 × rental cover ratio
For illustration only, using a hypothetical stress rate of 5% (not a current rate): a £200,000 mortgage gives monthly interest of about £833. At 125% cover the rent needed is about £1,042 a month; at 145% it is about £1,208. Lenders use the rent their valuer confirms the property can achieve, which may differ from the rent you expect, and the calculation is usually made on an interest-only basis even if you choose a repayment mortgage.
What is ICR (interest cover ratio)?
The interest cover ratio (ICR), also called the rental cover ratio, is the monthly rent divided by the monthly mortgage interest at the lender’s stress rate, shown as a percentage. A result of 125% means the rent is one and a quarter times the stressed interest.
The ratio a lender asks for often depends on how the income is taxed. Individual landlords cannot deduct mortgage interest from rental income in the way they once could; instead they receive a tax credit at the basic rate. Higher- and additional-rate taxpayers therefore keep less of the rent after tax, so lenders often test them at 145%. Basic-rate taxpayers are often tested at 125%. Limited companies pay corporation tax and can generally treat mortgage interest as a business cost, so lenders often apply 125% to them too. Some lenders use other ratios, for example for HMOs or holiday lets. NexMoney does not provide taxation advice; please speak to a qualified tax adviser or accountant about your position.
Stress rates and pay rates
The pay rate is the interest rate you actually pay on the mortgage. The stress rate is the rate the lender uses for the rental cover test, and it is often higher than the pay rate — for example the pay rate plus a margin, or a minimum floor rate. On fixed rates of five years or more, lenders are often allowed to test at, or close to, the pay rate, which can mean a given rent supports a larger loan. Stress rates vary by lender and product and change over time, which is why this calculator asks you to enter one rather than suggesting a figure.
Top-slicing and other ways to bridge a shortfall
If the rent falls short of the test, some lenders allow top-slicing: using surplus personal income to make up the difference, subject to their affordability checks and usually a minimum income. Other options can include a larger deposit, a longer fixed rate that is tested nearer the pay rate, or a different ownership structure. Not every lender offers these, and criteria vary.
Gross yield and what it leaves out
Gross yield is the annual rent divided by the property value. It is a quick way to compare properties, but it ignores letting and management fees, maintenance, insurance, service charges, void periods and tax, so your net return will be lower. Lenders do not lend on yield; they use the rental cover test.
Who this calculator is for
This rental income calculator is designed for first-time landlords checking a purchase and for existing landlords testing a remortgage or a new addition to a portfolio. It does not include fees added to the loan, portfolio-wide stress tests for landlords with four or more mortgaged properties, or lender-specific rules. For an accurate figure, speak to us — we compare how different lenders would assess the same property. You can also read our guide to buy-to-let mortgages, or use our other mortgage calculators.
Risk warnings
Your property may be repossessed if you do not keep up repayments on your mortgage.
Not all Buy to Let Mortgages are regulated by The Financial Conduct Authority.
Your questions, answered
How do I calculate the rent needed for a buy-to-let mortgage?
Multiply the mortgage amount by the lender’s stress rate, divide by 12 to get the monthly stressed interest, then multiply by the rental cover ratio, such as 125% or 145%. The result is the minimum monthly rent the lender may want to see. Lenders’ ratios and stress rates vary.
What is a good interest cover ratio?
Lenders commonly ask for 125% or 145%, depending on your tax position and whether you buy personally or through a limited company. Meeting a lender’s ratio does not guarantee a mortgage: your credit history, experience, the property and other criteria are also assessed.
Why do higher-rate taxpayers need 145% rental cover?
Individual landlords now receive only a basic-rate tax credit for mortgage interest, so higher- and additional-rate taxpayers keep less of the rent after tax. Many lenders allow for this by asking for a higher rental cover ratio, often 145%. NexMoney does not provide taxation advice.
What stress rate do lenders use?
It varies by lender and product. The stress rate is often higher than the rate you pay, although on fixed rates of five years or more lenders are often allowed to test at or near the pay rate. That is why this calculator asks you to enter the rate you want to test.
Can I still borrow if the rent does not cover the test?
Possibly. Some lenders allow top-slicing with surplus personal income, and a larger deposit or a longer fixed rate can also change the result. These options are subject to lender criteria and affordability.