Buy To Let Mortgage Affordability Calculator

Our Buy-to-Let Mortgage Affordability Calculator gives you an estimate of how much you may be able to borrow based on the rent you expect to receive and the mortgage details you provide. However, it’s important to remember that each lender has their own way of calculating affordability, and the actual amount you can borrow may vary. This calculator is just one method of working it out.

Here’s how we calculate your estimated loan:

Annual Rental Income:
First, we take the monthly rent you expect to receive from the property and multiply it by 12 to get the total rental income for the year.

Stress Rate:
Lenders apply something called a “stress rate” to make sure you can afford the mortgage payments, even if interest rates go up in the future. The stress rate depends on the type of mortgage:

For a 2-year fixed or tracker mortgage, the stress rate will be the higher of either 5.5% or your mortgage interest rate plus 2%.

For a 5-year fixed mortgage, the stress rate will be the higher of 5% or your mortgage interest rate plus 0.5%.

Rental Coverage Ratio (RCR):
Lenders also want to see that your rental income covers more than just the basic mortgage payment. This is where the Rental Coverage Ratio comes in:

If none of the applicants are higher or additional rate taxpayers, the RCR is usually 125%.

If one or more applicants are higher or additional rate taxpayers, the RCR increases to 145%.

Maximum Loan Calculation:
To estimate the maximum loan, we divide your annual rental income by both the stress rate and the rental coverage ratio. This gives an idea of the largest loan you might be able to borrow, including any fees that could be added to the mortgage.

In plain terms, we calculate it like this:

Maximum loan = (Annual rent divided by the stress rate) divided by the Rental Coverage Ratio.

Example:

Let’s say your expected annual rent is £18,000. If the stress rate is 5.5% and the RCR is 125%, the calculation would be as follows:

Divide £18,000 by 5.5% (which equals £327,272).

Then, divide £327,272 by 125% to give a maximum loan amount of approximately £261,818.

Again, this is just one way to calculate the loan. Different lenders may use different stress rates or rental coverage requirements, so it’s important to use this calculator as a guide and speak to a mortgage advisor for a more personalized estimate.