Buy to Let Mortgage Calculator

A buy-to-let mortgage works differently from the mortgage on your own home. Lenders care less about your salary and more about the rent: will it cover the mortgage comfortably, even if interest rates rise? That's why the same property can get a very different offer depending on the rent and your tax position.

Our Buy to Let Mortgage Calculator shows your monthly payment, how much you could borrow on the rent and whether you're likely to pass the lender's test. To see the return the property would make, use our Buy-to-Let Yield Calculator alongside it.

How buy-to-let lenders decide how much to lend

Two limits usually apply, and the lower one sets your maximum loan.

1. Loan to value

Most buy-to-let lenders lend up to 75% of the property's value, so you'll usually need a deposit of at least 25%. Some go higher, but rates are often better with a bigger deposit.

2. The rental cover test

Lenders check that the rent covers the mortgage interest by a margin, calculated at a stress rate that's higher than your actual rate. This is called the interest cover ratio (ICR). Typical tests are:

• 125% for basic-rate taxpayers and limited companies.
• 145% for higher and additional-rate taxpayers, because they get less tax relief on mortgage interest.

So, for a £187,500 loan tested at 5.5% with 125% cover, the rent needs to be at least:

£187,500 × 5.5% × 125% ÷ 12 = £1,074 a month

Stress rates and cover levels vary between lenders and products. Five-year fixed rates are often tested at the pay rate itself, which can let you borrow more.

How to use the calculator (Buy to Let Mortgage Calculator)

1. Enter the property price, your deposit as a percentage and the expected monthly rent.
2. Enter the interest rate and term, and choose interest only or repayment.
3. Choose who's buying: a basic-rate taxpayer, a higher or additional-rate taxpayer, or a limited company.
4. Check the stress rate. If your actual rate is higher, the calculator uses that instead.

You'll see your monthly payment, the loan to value, the rent needed to pass, the most you could borrow, whether you're likely to pass and what's left of the rent each month.

A worked example

With the calculator's default settings, you're buying a £250,000 property with a 25% deposit, renting it for £1,250 a month and paying 5% interest only:

• Mortgage: £187,500 at 75% loan to value
• Monthly interest-only payment: £187,500 × 5% ÷ 12 = £781.25
• Rent needed for 125% cover at 5.5%: £1,074.22, so you're likely to pass
• Rent minus mortgage: £468.75 a month, before any other costs

As a higher-rate taxpayer, the test rises to 145%, needing £1,246 a month. At £1,250 rent, that's only just enough.

Interest only or repayment?

Most buy-to-let mortgages are interest only. Your monthly payments cover just the interest, so they're much lower, but you still owe the full loan at the end of the term. Landlords usually plan to repay it by selling the property or remortgaging.

A repayment mortgage clears the debt by the end of the term, but the higher payments eat into your monthly cash flow. In the example above, switching to repayment takes the payment from £781 to about £1,096 a month.

The other costs of buying to let

The mortgage is only part of it:

• Stamp duty: you'll pay the higher rates for additional properties, which add 5% to each band in England. Our Stamp Duty Calculator works out the full bill.
• Running costs: letting agent fees, repairs, insurance, safety certificates and periods with no tenant.
• Income tax: you pay tax on rental profit. Individual landlords can't deduct mortgage interest as an expense; instead, they get a tax credit worth 20% of the interest.
• Capital Gains Tax when you sell, which our Capital Gains Tax on Property Calculator estimates.