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Buy-to-let

Does the rent actually stack up?

Buy-to-let lending is decided on the rent far more than on your income. Lenders take the expected rent, stress the mortgage against a higher rate, and require the rent to cover it by a margin. This works out whether it passes, and what loan the rent supports.

Rental CoverLive
Lenders set this by your tax position.
Commonly around 5.5%, though it varies.
Against the figures entered
—
Monthly rent the lender needs—
Maximum loan this rent supports—
Difference—

Numbers not quite working?

Send them over. Which lender you approach changes the answer more than most people expect.

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Illustrative only. Interest cover requirements, stress rates and lending criteria vary between lenders and change regularly. This is not a quote, a lending decision or tax advice.

What this sum cannot see

  • Which interest cover ratio applies to you is a tax question. Higher rate taxpayers are normally held to 145%, basic rate and limited company borrowers often to 125%, and getting that wrong changes the answer materially.
  • Stress rates vary by lender and by product. A five year fixed rate is often stressed at the pay rate rather than a notional higher one, which can make a longer fix pass where a two year fix fails.
  • Some lenders will top slice, using surplus personal income to bridge a shortfall. Not all will, and the ones that do apply their own rules.
  • It assumes the rent you have entered is what a valuer will agree. The lender uses the valuer's assessment, not the letting agent's estimate.

Every one of those is a question an adviser answers in a phone call. Send us your figures and we will tell you what they mean for you. Or read more about Buy-To-Let.

Buy-to-let lending, answered

What is an interest cover ratio?

The margin by which the rent must cover the mortgage interest at a stressed rate. At 145% the rent has to be 1.45 times the stressed interest payment, not merely equal to it.

Why does my tax position change the calculation?

Because higher rate taxpayers keep less of the rent after tax, so lenders require a larger cushion. Basic rate and limited company borrowers are usually held to a lower ratio.

Can I still borrow if the rent falls short?

Sometimes. A longer fixed rate is often stressed more gently, and some lenders will top slice using your personal income. Both narrow the lender choice rather than closing it.

Should I buy through a limited company?

That is a tax question and it depends on your income and plans. Speak to your accountant, and once you have decided we will find the lending to match.

Request assistance

Send these figures to an adviser

Your figures come with the enquiry. These few extra answers cover what the calculator cannot know.

  • One of the five advisers on Eastfield Road, not a call centre.
  • Usually the same working day.
  • No obligation, and nothing to sign at the end of it.

Would rather talk now? Call 01733 602 033.

Please do not include medical or health details here. An adviser will go through those with you directly.