Buy-to-Let Mortgage Calculator

Buy-to-let mortgages differ from residential mortgages in several ways. Most are interest-only, meaning monthly payments cover only the interest and the full capital balance is due at the end. Lenders typically require a rental coverage ratio of 125-145%, meaning the rental income must exceed the mortgage payment by that margin at a stress-tested interest rate.

Minimum deposits for buy-to-let are usually 25% of the property value, giving a maximum LTV of 75%. Some lenders offer up to 80% LTV at higher rates. Interest rates are typically 0.5-1.5% higher than equivalent residential rates. Affordability is assessed primarily on rental income rather than personal income, though most lenders also require a minimum personal income of £25,000.

This calculator models both interest-only and repayment buy-to-let mortgages. Enter the property price, deposit, rental income and interest rate to see monthly payments and the rental coverage ratio. It flags whether the rental income meets the typical 145% lender requirement at a stress rate of 5.5%.

BTL mortgage requirements vs residential. Deposits typically 25-40% (75% LTV max, vs 95% residential). Rental cover requirements: rent must usually exceed 145% of mortgage interest at a stressed rate of 5.5% (limited company SPVs: 125% at stress rate). Interest rates 0.5-1.5% higher than residential equivalents. Most BTL mortgages are interest-only (you pay only interest, capital owed at term end). Stamp Duty Land Tax: standard rates + 5% additional property surcharge (raised from 3% in October 2024).

Personal vs limited company BTL. Personal BTL: rental profit taxed at income tax rates (20-45%) but only 20% relief on mortgage interest (Section 24 phased in 2017-2020). Limited company SPV: Corporation Tax (19-25%) on profit AFTER full mortgage interest deduction. For higher-rate taxpayer landlords with significant mortgages, SPV typically saves £2-£5k/year per property. Setup: ~£100-£300 to incorporate, ~£800-£1,500/year accounting. Best for 3+ property portfolios or properties with high LTV.

PRA stress testing rules. Since 2017, the Prudential Regulation Authority (PRA) requires BTL lenders to stress-test rental cover at 5.5% (or 2 percentage points above the pay rate, whichever higher). Higher-rate taxpayers tested at 145% rental cover; basic-rate at 125%; limited companies typically 125%. Top-slicing (using personal income to cover any rental shortfall) is increasingly common — particularly for portfolio landlords (4+ mortgaged properties). Portfolio landlords face additional 'portfolio underwriting' across all properties.

Buy-to-let yield expectations 2026. Gross yield = annual rent ÷ property value × 100. National averages: London 4-5%, South East 5-6%, Manchester/Birmingham 6-8%, North East/North West 8-10%+. Net yield (after costs, voids, management) typically 60-70% of gross. Target NET yield 5%+ AND realistic capital growth 3-5%/year for total return ~8%/year. Leveraged returns: 75% LTV multiplies both gains AND losses by 4× on equity.