How buy-to-let lenders decide how much to lend
A buy-to-let mortgage is sized on the rent, not your salary. The lender checks that the rent covers the interest by a safety margin, at a test rate that's usually higher than the rate you'll pay. This is the interest cover ratio, or ICR.
- 125% is the usual ICR for basic-rate taxpayers and limited companies.
- 145% is usual for higher and additional-rate taxpayers, because Section 24 means they keep less of the rent. Some lenders go higher for additional-rate taxpayers.
- The stress rate is often the pay rate for a fix of five years or more, with a floor of around 5.5%. For two-year fixes and trackers it's often the pay rate plus 2%.
The most you can borrow is the lower of two limits: the loan the rent supports, and the lender's maximum loan to value, usually 75%.
Worked example
A higher-rate taxpayer buys a £300,000 flat that will let for £1,400 a month, £16,800 a year. On a five-year fix at 4.9%, the lender tests at its 5.5% floor. The rent supports a loan of £16,800 ÷ (145% × 5.5%) = £210,658. At 75% loan to value the lender would go to £225,000, so the rent sets the limit. The deposit is £89,342, and the interest-only payment at 4.9% is about £860 a month.
Buying in a limited company, at 125%, the same rent supports £244,364, so the 75% limit of £225,000 applies instead. Use the limited company calculator to see whether a company makes sense for you overall.
What else lenders look at
- Your income. Many lenders want a minimum personal income, often around £25,000, from work or other sources.
- Top slicing. Some lenders let spare personal income make up a shortfall in the rent.
- Experience and portfolio. With four or more mortgaged rentals, lenders look at your whole portfolio.
- The property. Flats above shops, short leases, HMOs and holiday lets can mean lower loan to value or fewer lenders.
Next, check the stamp duty, and the yield and cash return on the purchase.
Questions landlords ask
How much deposit do I need for a buy-to-let?
Usually at least 25%, because most lenders lend up to 75% of the value. If the rent doesn't support a 75% loan under the stress test, you'll need a bigger deposit. Add stamp duty, fees and any work on top.
What is a buy-to-let stress test?
The lender checks that the rent covers the mortgage interest by a set margin, usually 125% or 145%, at a test rate that's often 5.5% or more. The higher of the margin and the test rate, the less you can borrow.
Can I get a buy-to-let mortgage on my salary?
Buy-to-let loans are based on the rent. Some lenders will use spare personal income to top up a shortfall, known as top slicing, but you'll usually still need to meet a minimum income.
Are buy-to-let mortgages interest only?
Most are. You pay only the interest each month and repay the loan when you sell or remortgage. Repayment mortgages are available but cost more each month.
Sources
- Moneyfacts: buy-to-let mortgage rates
- Bank of England: underwriting standards for buy-to-let mortgage contracts (SS13/16)
Last updated 1 October 2026.