Buy-to-Let Mortgage Calculator

  • Buy-to-Let mortgage specialists
  • Free, no obligation initial consultation
  • 5-star reviews
  • Exclusive rates

Buy-to-Let Mortgage Calculator

  • Buy-to-Let mortgage specialists
  • Free, no obligation initial consultation
  • 5-star reviews
  • Exclusive rates
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Author: Carl Shave - CEO and co-founder
Last updated: 14 Jul 2024

What’s are the benefits of a Buy-to-Let calculator?

As a landlord you are often working on tight profit margins. Therefore, knowing your exact costs and income is essential. That’s where our Buy-to-Let mortgage affordability calculator comes in. By answering a few questions about your intentions, we can give you an idea of how much you could borrow.

Please consider that the amount provided by the Buy-to-Let mortgage repayment calculator is for illustration purposes only. The precise amount you could borrow will vary from lender to lender., Your individual circumstances will also play a part too. Some of the main factors a lender will review when they consider your application are:

  • All your income sources
  • Your tax band
  • The state of your credit history
  • What type of property it is, for example, a standard residential property or HMO

To discuss your Buy-to-Let mortgage needs, get in touch and we will pair you with one of our expert advisors.

How do lenders establish Buy-to-Let mortgage affordability?

Calculating your affordability for a Buy-to-Let mortgage is important because:

  • Mortgage lenders will use an affordability assessment to calculate how much they will let you borrow
  • It’s a clear indicator of how profitable the Buy-to-Let property could be

If you get your sums wrong, it could be the difference between making a profit and making a loss.

Whenever you apply for a mortgage, the lender will carry out an affordability assessment. For a standard residential mortgage, this involves assessing your verifiable income as well as any monthly outgoings. These factors help determine whether the lender will approve your application and how much you can borrow.

When it comes to Buy-to-Let mortgages, a different approach is used. Typically, a lender will compare the projected rental income generated with the mortgage interest payments. What this means is that they will be looking for your rental income to be more than the mortgage interest by a certain margin.

Until recently, most mortgage lenders would typically look for rental income to be 125% of the mortgage interest payment. This will be at a predetermined interest rate of 4.99%. However, with recent changes it’s more common for lenders to look for rental income to be 140% or 145%. With a predetermined rate of between 5%–5.5%.

Certain types of Buy-to-Lets, like House in Multiple Occupation (HMO) can see even higher margins – up to 170%.

Buy-to-Let lenders apply a “stress test” to affordability assessments. This is to help them ensure you can still afford the mortgage even if interest rates were to rise. Therefore, in most situations lenders use a predetermined interest rate that considers the potential of a future interest rate rise.

Unless the mortgage product’s interest rate is fixed for five years or more, lenders should base their calculations on the higher of:

  • A hike of at least 2% above current rates
  • Market projections of future interest rates
  • A minimum stress-test rate of 5%–5.5%

What do lenders consider for a Buy-to-Let mortgage?

Before applying for a mortgage, you’ll likely have an idea of how much rent the property might demand. However, for the purposes of the Buy-to-Let mortgage affordability criteria, don’t expect the lender to take your word for it. Lenders will typically base their calculations on a rental value provided by a surveyor, either in-house or external.

Many lenders’ Buy-to-Let affordability assessments also consider void periods. A common approach is to assume that the property will be empty one month out of the year.

Lenders can also factor in property-related expenditure during the affordability calculation, deducting this from the rental income. Expenditure that lenders typically consider include:

  • Letting agent fees, these are typically 10–15% of the rental income
  • Landlord insurance
  • The cost of any regular safety checks, including gas, electrical and fire safety
  • Any maintenance and repair costs

A final consideration is the lender’s maximum Loan-to-value (LTV) limit. The LTV places an absolute cap on the amount a lender will lend on a property, regardless of rental income. For Buy-to-Let lenders, a maximum LTV of 75% is typical, though some lenders do offer higher LTV mortgages.

Be aware that many lenders also price their mortgage products in LTV tiers. Therefore, if you can put down a larger deposit, you may qualify for more attractive interest rates.