Buy-to-let, assessed on the rent — not your payslip.
Buy-to-let lending works differently: the property’s rental income does most of the heavy lifting. Understand the stress test and you’ll know exactly how much you can borrow.
How buy-to-let lending is assessed
Lenders judge a buy-to-let case primarily on rental yield, not your earnings. The projected rent must cover the mortgage interest by a set margin — the interest coverage ratio (ICR) — usually 125% for basic-rate taxpayers and 145% for higher-rate, tested at a stressed interest rate.
That is good news for contractors: where a residential application hinges on how your income is read, a buy-to-let hinges mostly on the rent the property commands. Most lenders still want a minimum personal income, which we can evidence from your contract via the 46-week method.
The stress test in numbers
The harder the ICR and the higher the stress rate, the more rent you need for a given loan. Use the calculator below to see the maximum loan your rent supports.
Personal name or limited company?
Since tax relief on personal mortgage interest was restricted (Section 24), many investors hold property through a limited company instead, paying corporation tax on profits rather than personal income tax on rent. It isn’t right for everyone, but for higher-rate taxpayers building a portfolio it often is. See limited company & SPV buy-to-let.
- BTL is assessed mainly on rent, via the 125%/145% ICR stress test.
- A higher stress rate or ICR means you need more rent per pound borrowed.
- Most BTL mortgages are interest-only to maximise monthly cash flow.
- Limited company / SPV ownership can be more tax-efficient for portfolios.
Buy-to-let lenders we work with — a selection
Buy-to-let, answered
How do lenders assess a buy-to-let mortgage?+
Mainly on the rent, not your salary. Lenders run a stress test requiring the rent to cover the mortgage interest by a set margin — typically 125% for basic-rate taxpayers and 145% for higher-rate — at an assumed stress interest rate.
What is the 125% / 145% rule?+
It’s the interest coverage ratio (ICR). The projected rent must equal at least 125% of the mortgage interest for basic-rate taxpayers, or 145% for higher-rate taxpayers, calculated at the lender’s stress rate. It buffers against void periods and rate rises.
Can a contractor get a buy-to-let mortgage?+
Yes. Because BTL is assessed mainly on rental income, your contractor status matters less than for a residential mortgage — though many lenders still want to see a minimum personal income, which we can evidence from your contract.
Is buy-to-let regulated by the FCA?+
Most buy-to-let mortgages are not regulated by the FCA. Some — such as a property let to a close family member (a ‘consumer buy-to-let’) — are. We’ll confirm which applies to your case.