UK Buy-to-Let Mortgage Calculator

How to Use the UK Buy-to-Let Mortgage Calculator

How UK Buy-to-Let Mortgages Work

A buy-to-let mortgage funds a property bought to rent out, not to live in, and UK lenders assess it on a different basis from a residential mortgage. Most buy-to-let mortgages are interest-only by default, deposits are typically 25% rather than the 5-10% common on residential deals, and affordability is driven mainly by the rent the property can achieve, checked against a stress test, rather than your personal income.

The Rental Cover (ICR) Stress Test

Since the Prudential Regulation Authority's underwriting standard (SS13/16, in force since January 2017), UK lenders must check that the rent covers the mortgage interest by a set margin, calculated at a stressed interest rate well above the actual pay rate, not the real monthly payment. This protects against a future rate rise or rent shortfall.

What stress rate and threshold apply?

Higher-rate taxpayers face a tougher 145% threshold because Section 24 (below) leaves them with less after-tax profit per pound of rent than a basic-rate taxpayer or a limited company, so lenders require more rental headroom to compensate. Many 5-year fixed-rate products qualify for a softer stress test, sometimes just the pay rate plus 1%, since a 5-year fix removes the risk of a rate rise during the deal.

What Deposit Do You Need for a Buy-to-Let Mortgage?

Most UK lenders set a minimum 25% deposit (75% loan-to-value) for buy-to-let, the level that unlocks the widest range of products and the most competitive rates. Some lenders go up to 85% LTV for the right applicant, at a higher rate and stricter stress test, since a smaller deposit means a larger loan to stress-test against the same rent. A bigger deposit, 30-40%, both lowers the monthly payment and makes the rental cover stress test easier to pass on a lower-yielding property.

Does a bigger deposit always help you pass the stress test?

Yes, directly: since interest is charged on the loan, not the property value, a smaller loan means a smaller stressed interest figure to cover. On a £300,000 property, a 25% deposit leaves a £225,000 loan; a 35% deposit cuts that to £195,000, roughly 13% less loan, which flows straight through to roughly 13% less required rent at the same stress rate and ICR threshold.

Stamp Duty on a UK Buy-to-Let Property

Buy-to-let and second-home purchases pay standard residential Stamp Duty Land Tax plus a 5% surcharge on every band, a rate that rose from 3% on 31 October 2024 and remains in force. The surcharge applies to any purchase over £40,000 where the buyer will own two or more dwellings on completion, including via a limited company.

Worked example, £300,000 buy-to-let purchase: 5% on the first £125,000 = £6,250; 7% on the next £125,000 (to £250,000) = £8,750; 10% on the remaining £50,000 = £5,000. Total SDLT: £20,000. A non-UK resident buyer pays a further 2% surcharge on top of every band.

Section 24: How Mortgage Interest Tax Relief Works for Landlords

Since the 2020/21 tax year, Section 24 stops individual landlords deducting mortgage interest and other finance costs from rental income before tax. Instead, they pay tax on the full rental profit and then claim a 20% basic-rate tax credit on the finance costs, regardless of whether they're a basic, higher or additional-rate taxpayer. A higher-rate taxpayer effectively gets only 20% relief on interest that used to be relieved at 40% or 45%, which is why lenders apply the tougher 145% ICR threshold to them.

Does Section 24 apply to limited companies?

No. Landlords who hold property through a limited company are exempt from Section 24 and can still deduct mortgage interest as a normal business expense before paying Corporation Tax, which is a major reason many landlords with multiple properties incorporate. A further change is already confirmed: from 6 April 2027, property income moves to its own basic rate of 22%, and the Section 24 credit will be recalculated at that new 22% rate rather than 20%.

Interest-Only or Repayment for a Buy-to-Let Mortgage?

Most UK landlords choose interest-only, which keeps the monthly payment to the interest alone and maximises monthly cash flow, with the loan balance itself repaid later, typically by selling the property or refinancing. A repayment (capital and interest) mortgage costs more each month, since part of every payment reduces the loan balance, but it builds equity automatically and removes the risk of an unrepaid loan at the end of the term.

Why does interest-only pass the rental stress test more easily than repayment?

The ICR stress test only checks rent against the interest portion of the payment, so an interest-only loan and a repayment loan of the same size stress-test identically; what changes is the actual monthly cost the landlord pays, not the amount they can borrow. Landlords who want a smaller real monthly outgoing choose interest-only for that reason, not because it unlocks extra borrowing.