Sizing up a rental investment? Enter the property price, deposit, rate and monthly rent to see your interest-only payment, gross and net rental yield, and the interest coverage ratio lenders use to approve buy-to-let loans.
Interest-only · rental yield · ICR
Most buy-to-let mortgages are interest-only, so the monthly payment is simply the loan multiplied by the monthly interest rate — the capital is repaid when you sell or refinance. The two figures every landlord watches are the rental yield and the interest coverage ratio.
Lenders won't lend on rent alone — they apply an ICR threshold, usually 125% for basic-rate taxpayers and 145% for higher-rate, and stress-test the rent against a notional rate (often 5.5% or the pay rate plus 2%). Your rent must cover that stressed interest by the required margin.
| Rent / month | ICR at 5.5% on £150k | Passes 145%? |
|---|---|---|
| £900 | 131% | No |
| £1,000 | 145% | Borderline |
| £1,100 | 160% | Yes |
| £1,250 | 182% | Yes |
Buy-to-let purchases carry a 5% additional-property surcharge on top of standard Stamp Duty — work it out with the stamp duty calculator. Compare a residential repayment deal on the same property with the mortgage calculator, and check the underlying interest-only sums with the interest-only mortgage calculator.
Gross yield is annual rent ÷ property price. A £200,000 property let for £1,000 a month earns £12,000 a year — a gross yield of 6%. Net yield deducts running costs like the mortgage.
ICR is monthly rent ÷ monthly mortgage interest. Lenders usually want at least 125% for basic-rate and 145% for higher-rate landlords, stress-tested at a higher notional rate.
Most are. The monthly payment covers only the interest, and the capital is repaid when you sell or refinance — keeping monthly costs low and maximising cash flow.
Yes. A 5% additional-property surcharge applies on top of standard Stamp Duty for second homes and buy-to-lets in England and Northern Ireland. Use our stamp duty calculator to see the bill.
