Edinburgh · Scotland · UK-wide
Buy-to-let lending is decided by rent, not salary. A lender takes the expected monthly rent, applies an interest coverage ratio — usually 125% for basic-rate taxpayers and limited companies, 145% for higher-rate taxpayers — and tests it against a stressed notional rate rather than the rate you will actually pay. This calculator runs that same arithmetic so you can see the maximum loan a property will support before you offer on it.
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If the rent does not stretch far enough, there are usually four or five routes round it. Send this over and we will tell you which apply to your property.
Common questions
They divide the annual rent by the interest coverage ratio and then by the stressed interest rate. For example, £1,200 a month is £14,400 a year; at a 125% ratio and a 5.5% stressed rate that supports a loan of £14,400 ÷ 1.25 ÷ 0.055, or about £209,000 — subject to the loan-to-value cap.
The margin by which rent must exceed the mortgage interest. A 145% ratio means the rent must be 1.45 times the stressed monthly interest. Higher-rate taxpayers borrowing personally usually face 145%; basic-rate taxpayers and limited companies usually 125%.
Because it removes short-term interest rate risk, most lenders stress test a five-year fix at or close to the actual pay rate instead of a higher notional rate. That single difference frequently increases the maximum loan by 20% or more on the same property.
There are several routes: a larger deposit, a five-year fixed rate, buying through a limited company at the lower ratio, a lender that allows top-slicing from personal income, or a property with a higher yield. We will tell you which of those is realistic for your situation.
A twenty-minute conversation will tell you what you can realistically borrow, what it will cost and whether it is worth doing. It is free, and we will tell you honestly if the answer is no.