Buy to let isn't a residential mortgage with a different label. Lenders stress-test the rent against an interest coverage ratio (ICR), usually 125%–145% at a notional rate higher than the pay rate. We model your deal at the stress rate so you know it works before you commit.
Interest Coverage Ratio (ICR)
ICR is the rent expressed as a percentage of the annual mortgage interest, calculated at a stressed rate (often 5%–6% even if your pay rate is lower). Most lenders require 125% for basic-rate taxpayers and 145% for higher-rate. We calculate it for every lender we consider.
- 125% ICR for basic-rate taxpayers
- 145% ICR for higher-rate taxpayers
- Stressed at a notional rate above your pay rate
Rental yield vs the stress test
A gross yield that looks fine today can fail the stress test if the notional rate rises. We model your rental income against each lender's stress assumptions so you don't get a nasty surprise at valuation.
- Gross yield calculated on purchase price
- Stress-tested at each lender's notional rate
- Rental shortfall flagged before you buy
Tax treatment
Mortgage interest tax relief has been restricted to a 20% credit for individual landlords. For higher-rate taxpayers, holding property in a limited company (SPV) can be more tax-efficient - see our Limited Company BTL page.
- 20% tax credit on mortgage interest for individuals
- Full interest deductibility via a limited company SPV
- We'll flag when incorporation makes sense