Rental cover and stress tests: how lenders decide what you can borrow.
On a buy-to-let the rent is the affordability test. Lenders want it to cover the interest by a margin, at a stressed rate. Here is the calculation, with numbers, and the ways round a shortfall.
The calculation
Lenders check that the monthly rent is at least a percentage of the monthly interest, calculated at a stress rate rather than the actual pay rate:
Rent × 12 ÷ cover ratio ÷ stress rate = maximum loan
- Cover ratio (ICR): 125% for basic-rate taxpayers and limited companies; 145% (sometimes 140% or 150%) for higher and additional-rate taxpayers, to reflect the tax on the rent. Some lenders use one figure for everyone.
- Stress rate: for deals shorter than five years, the higher of the pay rate plus 2% and 5.5% (a regulatory minimum). For five-year fixes and longer, most lenders stress at the pay rate itself, which is why five-year fixes let you borrow more.
Rent of £1,200 a month, pay rate 4.99%
| Scenario | Cover | Stress rate | Maximum loan |
|---|---|---|---|
| Basic-rate taxpayer, 5-year fix | 125% | 4.99% | £230,861 |
| Basic-rate taxpayer, 2-year fix | 125% | 6.99% | £164,807 |
| Higher-rate taxpayer, 5-year fix | 145% | 4.99% | £199,018 |
| Higher-rate taxpayer, 2-year fix | 145% | 6.99% | £142,075 |
| Limited company, 5-year fix | 125% | 4.99% | £230,861 |
Then the loan-to-value cap applies: 75% of the value for most lenders, so on a £250,000 property the loan is capped at £187,500 whatever the rent says. Try your own figures on the rental cover calculator.
Which rent counts
The lender's valuer confirms a market rent for the property, and the lender uses the lower of that and the rent you actually receive. If your tenant pays below market, that is the figure. If you charge above market, the valuer's figure is. For HMOs some lenders use the room-by-room total; others use a single-let figure, which can be much lower. HMOs.
When the rent falls short
Rates rose faster than rents for many landlords, and a loan that passed the test in 2021 may fail it now. Options, roughly in order:
- A five-year fix. Stressed at the pay rate, so the maximum loan is often 30% to 40% higher than on a two-year deal.
- A product transfer. Most lenders do not re-test affordability on a like-for-like rate switch. If you cannot pass elsewhere, this keeps you off the SVR.
- Top-slicing. Some lenders use your personal income to make up a rental shortfall. Useful for higher earners with one or two properties.
- A limited company. Tested at 125% rather than 145%, though moving a property into a company has its own costs. Guide.
- Reduce the loan. Paying some down from savings, or from equity released on another property.
- Raise the rent. If it is below market and the tenancy allows. Lenders use the valuer's figure, so a genuine increase helps.
Portfolio landlords
With four or more mortgaged buy-to-lets the lender also looks at the whole portfolio's cover, typically wanting 125% to 145% across everything at a stress rate, and a portfolio loan-to-value of 65% to 75%. Portfolio landlords.
A note on the numbers. Rental cover ratios, stress rates, loan-to-value limits and fees are typical of the market at the time of writing (2026) and differ from lender to lender. Tax rules are for individuals and companies resident in the UK and change with each Budget. This is general information, not advice: a broker will tell you what applies to your property, and an accountant what applies to your tax.
Common questions
What is a good rental yield for a mortgage?
At 2026 rates, the sums generally work at a gross yield of about 5.5% and above for a 75% loan on a five-year fix. Below that, the loan is capped by the rent rather than the value.
Do lenders count my salary at all?
Most have a minimum personal income (often £25,000, sometimes none) as a check that you could cover a void, but they do not use it in the loan calculation unless they top-slice.
Why does a higher-rate taxpayer get a smaller loan?
Because income tax on the rent leaves less to pay the mortgage, and since the Section 24 changes mortgage interest is no longer deductible for individuals. Lenders build that into the 145% ratio.
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