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Work out your monthly buy-to-let mortgage payment, interest-only or repayment, and check how much the rent will let you borrow under a lender’s rental cover test.
£625
Interest-only · repayment would be £877
At 125% cover and a 5.5% stress rate, £1,000 rent supports a loan of up to about £174,545.
Illustrative only, not a mortgage offer. Rent minus the mortgage is not your profit: running costs, voids and tax come off too. Speak to an FCA-authorised mortgage broker before you apply.
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A buy-to-let mortgage payment depends on the size of the loan, the interest rate, the term and whether you choose interest-only or repayment. On a £200,000 property with a 25% deposit, a £150,000 loan at 5% over 25 years costs about £625 a month interest-only, or about £877 a month on a repayment basis. How much you can borrow is usually set by the rent, not your salary, through the lender’s rental cover test.
| Illustrative example: £150,000 loan, 5%, 25 years | Interest-only | Repayment |
|---|---|---|
| Monthly payment | £625 | £877 |
| Interest paid over 25 years | £187,500 | £113,066 |
| Owed at the end | £150,000 | £0 |
Assumes the rate stays at 5% for the whole term, which in practice it will not. Use the calculator with a higher rate to see how a rise would change your payment.
Most lenders work out the maximum loan from the expected rent using a rental cover test, also called an interest cover ratio (ICR). The rent must cover the mortgage interest, calculated at a stressed rate, by a set margin. Many lenders use 125% for basic-rate taxpayers and limited companies and 145% for higher-rate taxpayers, though each lender sets its own figures.
Maximum loan = annual rent ÷ (rental cover × stress rate). With £1,000 a month rent, 125% cover and a 5.5% stress rate, that is £12,000 ÷ (1.25 × 0.055), or about £174,545. At 145% cover it falls to about £150,470.
Lenders also cap the loan to value, often at 75% for buy-to-let, so the smaller of the two limits applies. Some lenders also look at your personal income and experience, especially for first-time landlords.
Usually at least 20% to 25% of the price, and more if the rent does not pass the rental cover test at that loan size. Remember the deposit is only part of the cash you need: stamp duty, legal fees, survey, lender fees and a cash reserve come on top. Our guide on how much money you need to buy your first rental property adds it all up, and the buy-to-let calculator includes stamp duty.
Enter the property’s current value as the price and set the deposit to your equity percentage. The calculator shows the new payment and whether the rent supports the loan you want. If your fixed rate is ending, gather your rent, current balance and the end date before speaking to a broker. PROXERA tracks fixed-rate end dates for every property so they never catch you out.
Letting fees, insurance, repairs, service charges, empty periods and tax all come out of the rent too. For the full picture, run the numbers through the deal analyser or read how to calculate rental cash flow.
Interest-only is the loan multiplied by the annual interest rate, divided by 12. Repayment uses a standard amortisation formula so that the loan is repaid by the end of the term. On a £150,000 loan at 5% over 25 years that is about £625 a month interest-only or £877 repayment.
Most lenders base it on rent: annual rent divided by the rental cover ratio multiplied by a stress rate. With £1,000 a month rent, 125% cover and a 5.5% stress rate, that is about £174,545, subject to the lender’s maximum loan to value.
The interest cover ratio checks that the rent covers the mortgage interest, at a stressed rate, by a margin such as 125% or 145%. Each lender sets its own ratio and stress rate.
Usually at least 20% to 25%, plus stamp duty, fees and a cash reserve. A bigger deposit may be needed if the rent does not pass the rental cover test.
Interest-only keeps monthly payments lower but leaves the full loan to repay at the end. Repayment costs more each month but clears the loan. It is a personal decision; an FCA-authorised mortgage broker can help you compare.
No. The calculator gives illustrative figures. Lenders apply their own criteria, rates and fees. Speak to an FCA-authorised mortgage broker before applying.
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Information, not advice. These figures are illustrative and are not a mortgage offer or a personal recommendation. Lenders set their own criteria, rates and fees. PROXERA is not authorised by the FCA to give mortgage advice; speak to an FCA-authorised mortgage broker before applying.
