Buy-to-Let Mortgage Calculator: How Lenders Work Out What You Can Borrow

1 Step 1

How are buy-to-let mortgages calculated?

Buy-to-let mortgages work differently from residential mortgages. Lenders do not primarily use your personal income to set the maximum loan amount. They use the rental income the property is expected to generate. The calculation method is called the Interest Coverage Ratio, written as ICR.

Understanding this calculation tells you exactly why a calculator output is what it is, and what you would need to change to borrow more.

ICR and the stress test

The ICR is the ratio between the monthly or annual rental income and the mortgage interest cost, calculated at a notional stress rate. Most lenders apply the following ICR requirements:

125% for basic-rate taxpayers (20% income tax band, personal name)
145% for higher-rate or additional-rate taxpayers (40% or 45% band, personal name)
125% for limited company buy-to-let applications at most lenders

The stress rate is a hypothetical interest rate used in the calculation regardless of the actual product rate you will pay. It is designed to ensure the rental income would still cover the mortgage if rates increased. The typical stress rate used by most lenders is around 5.5%, although several lenders reduced their floors in early 2026 as the Bank of England base rate settled at 3.75%. The exact stress rate varies by lender and should be confirmed before relying on any estimate.

Worked example: what your rental income actually supports

These figures use a £250,000 purchase price and expected monthly rent of £1,100 (£13,200 annually), with a 5.5% stress rate.

Higher-rate taxpayer (ICR 145%):

Divide annual rent by 1.45: £13,200 divided by 1.45 = £9,103
Divide by the stress rate: £9,103 divided by 0.055 = £165,500 maximum loan
That is a 66% LTV, requiring a deposit of £84,500

Basic-rate taxpayer (ICR 125%):

Divide annual rent by 1.25: £13,200 divided by 1.25 = £10,560
Divide by the stress rate: £10,560 divided by 0.055 = £192,000 maximum loan
That is a 77% LTV, which most lenders would cap at 75%, requiring a deposit of £62,500

The £26,500 difference in maximum borrowing between a basic-rate and higher-rate taxpayer on the same property comes entirely from the tax band. This is why your tax position matters before you commit to a structure. A higher-rate taxpayer may need to either put in a larger deposit or consider a limited company structure to reach the same loan amount.

How much deposit do you need for a buy-to-let mortgage?

The minimum deposit for a buy-to-let mortgage is 25% for most lenders, capping borrowing at 75% LTV. A small number of specialist lenders will consider a 20% deposit, but product choice narrows significantly and rates are higher at this tier.

The practical deposit thresholds to build into your planning:

25% deposit (75% LTV): standard entry point, widest product choice
30% to 35% deposit (65 to 70% LTV): some improvement in pricing within this range
40% deposit (60% LTV): unlocks materially better rates at most mainstream buy-to-let lenders

For new landlords in particular, the 25% minimum should be factored into planning alongside stamp duty costs, which are set out below.

What does a buy-to-let property actually cost to buy?

The deposit is not the only acquisition cost. Stamp duty on buy-to-let properties is substantially higher than on a residential purchase, and Section 24 affects the ongoing net return on the investment. Both need to be factored into any investment calculation before you commit.

Stamp duty on a buy-to-let purchase

Buy-to-let properties and second homes attract a 5% surcharge on top of standard residential Stamp Duty Land Tax rates. This surcharge applies from the first pound of the purchase price. The rate was increased from 3% to 5% in the Autumn Budget of October 2024 and remains at 5% in 2026.

Standard SDLT thresholds also reverted to pre-2022 levels from 1 April 2025. Using the £250,000 example above:

Standard SDLT on £250,000: £2,500 (0% on first £125,000, 2% on £125,001 to £250,000)
5% surcharge on the full £250,000: £12,500
Total stamp duty: £15,000

That is £15,000 in stamp duty on a £250,000 purchase, which should be funded separately from your deposit rather than added to the loan. On a £400,000 property the stamp duty rises further. Building this cost into your figures before you find a property prevents surprises at the point of purchase.

Section 24 and its impact on net return

Section 24 of the Finance Act 2015 removed the ability for individual landlords to deduct mortgage interest as an expense against rental income. Before April 2020, a landlord paying £6,000 a year in mortgage interest could offset the full amount against rental income, reducing their taxable profit. Under the current rules:

Mortgage interest cannot be deducted from rental income as an expense
Landlords receive a 20% tax credit on mortgage interest costs instead
Higher-rate taxpayers receive relief at 20% rather than the 40% they previously received

Section 24 does not affect the mortgage you can get. It affects the net return on the investment after tax. For higher-rate taxpayers, it is one of the primary reasons many landlords have moved buy-to-let properties into limited companies, where mortgage interest remains fully deductible against company profits. This is a tax and accountancy consideration that your accountant should model before you decide on the ownership structure.

For more on how to structure a buy-to-let investment, read our buy-to-let mortgage guide.

What if the rental income does not cover the lender’s requirement?

The ICR calculation sometimes means the rental income on a specific property does not produce a high enough maximum loan at a given deposit level. These are the main options when the standard calculation falls short.

Top slicing

Top slicing allows a lender to supplement the rental income shortfall with the borrower’s personal income. If the rent does not fully cover the ICR requirement, the lender uses personal earnings to bridge the gap. Not all lenders offer top slicing, and those that do apply specific eligibility criteria. It is more commonly available for experienced landlords and higher-income applicants. A broker can identify which lenders currently offer top slicing and whether your income profile qualifies.

A higher deposit

Increasing the deposit reduces the loan amount, which reduces the interest the rental income needs to cover. If the ICR calculation produces a maximum loan below what is required, a larger deposit is often the most straightforward route to making the numbers work. In the worked example above, taking the maximum loan from £165,500 to £125,000 on the £250,000 property would require a deposit of £125,000 instead of £84,500, but it significantly reduces the ICR pressure.

Limited company buy-to-let

Applications in a limited company name often attract lower ICR ratios at the lender level: 125% rather than 145% for higher-rate taxpayers at many lenders. Some lenders also apply lower stress rates to limited company cases. For higher-rate taxpayers, a limited company application can unlock a larger maximum loan on the same property compared with a personal name application, as well as the Section 24 benefit.

Rates and arrangement fees on limited company mortgages are generally higher than personal name products. The decision involves both mortgage costs and tax planning and requires input from an accountant alongside advice from a mortgage broker. If you are self-employed and considering a buy-to-let investment, read our guide for self-employed buy-to-let applicants.

Portfolio landlords: what changes at four or more properties?

Landlords with four or more mortgaged buy-to-let properties are classified as portfolio landlords under Prudential Regulation Authority rules introduced in September 2017. When a portfolio landlord applies for a new mortgage, the lender must assess the entire portfolio rather than just the new property. This means:

Background portfolio information must be submitted with each new application: addresses, current mortgage balances, rental income, and LTVs across all properties
Stress testing applies across the portfolio, not just the new loan
Lenders have varying levels of appetite for complex portfolios

Not all lenders accept portfolio landlord applications. Working with a whole-of-market broker is particularly valuable for portfolio landlords because lender appetite changes regularly and matching the portfolio profile to the right lender materially affects the outcome.

Current buy-to-let mortgage rates at 75% LTV average 5.44% on a 2-year fix and 5.75% on a 5-year fix based on Moneyfacts data from April 2026. The best available 5-year fixed rate in the market is 4.29%. For context on whether to fix now or wait, read our post on whether to fix your mortgage in 2026.

Frequently asked questions

How much can you borrow on a buy-to-let mortgage?

There is no fixed income multiple as with residential mortgages. The maximum loan is determined by the rental income, the lender’s ICR requirement, and the stress rate applied. The worked example above shows the calculation in practice. A broker can run this calculation for you against multiple lenders to find the most suitable option.

Do you need a 25% deposit for a buy-to-let mortgage?

Yes, for most lenders. A 25% deposit is the standard minimum, meaning a maximum LTV of 75%. A small number of specialist lenders will consider 20%, but at higher rates and with fewer options. The most competitive pricing typically starts at 40% deposit (60% LTV).

Is buy-to-let still worth it in the UK in 2026?

The answer depends on the specific property, location, tax position, and financing structure. Higher stamp duty, the removal of mortgage interest relief for individual landlords, and higher mortgage rates compared with 2021 all affect net returns. Buy-to-let remains viable for the right investor with the right structure. It requires more careful financial modelling than it did five years ago.

What salary do I need for a buy-to-let mortgage?

Most lenders require a minimum personal income of £25,000 per year. Some set the threshold at £20,000. Income does not drive the loan size, which is determined by rental income, but it acts as a gateway eligibility requirement at most lenders.

Can I get a buy-to-let mortgage if I am self-employed?

Yes. Lenders use the same ICR methodology regardless of employment type. The personal income threshold is verified using SA302s, tax year overviews, and company accounts where applicable. The rental income is what determines the loan size. Self-employed applicants sometimes need to demonstrate two or more years of income history to satisfy the minimum income requirement.

What is a rental yield and how does it affect borrowing?

Gross rental yield is annual rent divided by property value, expressed as a percentage. A property worth £200,000 generating £12,000 annually produces a 6% gross yield. Net yield is lower once costs such as void periods, maintenance, lettings fees, and mortgage costs are deducted. Lenders do not assess yield directly, but it is a useful measure for investors evaluating whether the income justifies the acquisition cost.

Speak to a Mortgage Adviser

If you have questions or want to discuss your options, book a free discovery call below.

Book a Free Discovery Call

Your home may be repossessed if you don’t keep up repayments on your mortgage.

Knox Mortgages is a trading style of Fort Advice Bureau which is regulated and authorised by the FCA to conduct Mortgage and Protection business, FRN: 972730