Enter the monthly rent.
| ICR | at 5.5% | at your rate |
|---|
How the ICR calculation works
Lenders size a buy-to-let loan so the annual rent covers the annual interest by a set margin at a stressed rate. The maximum loan is the annual rent divided by the cover ratio times the stress rate. At £1,500 a month, 125% and 5.5%, that is £18,000 ÷ (1.25 × 0.055) = £261,818. The loan is then capped at the lender's maximum LTV. Limited company borrowers and basic-rate taxpayers are usually tested at 125%, higher-rate taxpayers at 145%, and five-year fixes are often stressed at the pay rate rather than a higher notional rate.
Top slicing lets some lenders use the borrower's surplus personal income to make up a rental shortfall. Whether it is allowed, and how much income counts, varies by lender.
Questions brokers ask
What is the ICR on a buy-to-let mortgage?
The interest cover ratio is how much the rent must exceed the mortgage interest at the lender's stress rate. 125% means the rent must be at least 1.25 times the stressed interest. Limited company and basic-rate applicants are usually at 125%, higher-rate taxpayers at 145%.
How do I calculate the maximum buy-to-let loan from the rent?
Divide the annual rent by the ICR multiplied by the stress rate. For £1,500 a month at 125% and 5.5%: £18,000 ÷ 0.06875 = £261,818. Then cap it at the lender's maximum LTV.
What stress rate do lenders use?
It depends on the product. Five-year and longer fixes are often stressed at the pay rate or a small margin above it, while shorter fixes and trackers are usually stressed at a higher notional rate. Each lender sets its own.
What is top slicing?
Top slicing lets a lender use the borrower's surplus personal income to cover a rental shortfall against the ICR. Not every lender offers it, and those that do set their own minimum income and affordability rules.
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