Buy-to-Let Mortgage Affordability
Buy-to-let affordability is assessed differently from residential mortgages because it is based on rental income rather than personal income.
Rental Income and Lender Stress Tests
Buy-to-let lenders assess affordability using the interest coverage ratio (ICR). Rental income must typically cover 125–145% of the monthly mortgage payment, calculated at a stressed interest rate of around 5–5.5%. This ensures the mortgage remains affordable if rates rise.
Deposit Requirements for Buy-to-Let
Most buy-to-let lenders require a minimum deposit of 25% of the property value. A larger deposit reduces the loan-to-value ratio and typically gives access to lower interest rates and a wider choice of lenders.
Landlord Costs to Consider
Beyond the mortgage, landlords need to budget for letting agent fees (typically 8–15% of monthly rent), maintenance and repairs, landlord insurance, gas and electrical safety certificates, and void periods when the property is empty. These costs affect the net rental yield and overall profitability.
Tax Considerations
Buy-to-let tax rules are complex. Rental income is subject to income tax, and the rules on mortgage interest relief changed significantly from 2017. Capital gains tax applies when you sell a rental property. Always seek advice from a qualified accountant or tax adviser before investing in buy-to-let property.
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Calculate Buy-to-Let Affordability →WizeBudget provides calculators and general information only. Results are estimates and do not constitute mortgage, financial or legal advice. Tax information is general only — always seek qualified advice.