investing

Buy to let mortgage explained: how lenders test the rent and what the rules say

How a buy to let mortgage works: the interest cover ratio lenders use, a worked rent example at 125% and 145%, and what the FCA does and does not regulate.

4 min read
Last reviewed 4 November 2026
By Your Property Check team

Part 1 of 7

What a buy to let mortgage tests

General information, not advice. Read our Terms. The rules below are for England, Wales and Scotland and were checked on 4 November 2026. A buy to let mortgage differs from a home mortgage because the lender looks first at whether the rent can carry the loan, not only at your salary. Lenders set their own criteria, so use this page to understand the method, then check a lender or a regulated broker for current terms.

Part 2 of 7

The tests lenders use

The Bank of England's Quarterly Bulletin (2023) defines the interest cover ratio (ICR) as rental income divided by the interest paid on the mortgage. It says the Prudential Regulation Authority's supervisory statement 13/16 expects the interest to be worked out at a stressed rate, at least the higher of 5.5% or a 2 percentage point rise in buy to let mortgage rates.

Test	How it works	Example	Source
Interest cover ratio, basic rate	Rent must be at least 125% of the stressed interest, assuming the basic rate of income tax	£150,000 loan needs £859 a month	Bank of England, 2023
Interest cover ratio, higher rate	Lenders have tended to test higher-rate taxpayers to 145%	£150,000 loan needs £997 a month	Bank of England, 2023
Stressed rate	Interest worked out at the higher of 5.5% or a 2 point rise in buy to let rates	5.5% on £150,000 is £687.50 a month	Bank of England, 2023
Loan size	A lender may also cap the loan against the property's value	Set by each lender	Check with the lender

The bulletin gives the breakeven ICR for higher and additional-rate taxpayers as about 167%, which is why 145% is a lender convention and does not show that the investment pays.

Part 3 of 7

A worked example

This uses the same logic as our buy to let stress test. The monthly interest on a £150,000 loan at the 5.5% stressed rate is £150,000 x 5.5% / 12 = £687.50. At 125% the lender needs rent of £687.50 x 1.25 = £859.38, shown as £859. At 145% it needs £996.88, shown as £997.

You can turn it round. With rent of £900 a month, the most the same test allows is £900 x 12 / (5.5% x 1.25) = £157,091 at 125%, or £135,423 at 145%. The higher-rate test cuts the loan by roughly £21,700 on the same rent. These are the test, not an offer: a lender may use a different stressed rate, and the figures ignore fees, voids and repairs. Our ROI calculator covers running costs.

Part 4 of 7

The test does not cover every loan

The Bank of England says the stress-testing requirements do not cover all buy to let lending. It reports that fixed rates of five years or more, plus lending by non-banks, together made up about 75% of new buy to let lending in the third quarter of 2023. So a lender offering a long fix, or a non-bank lender, may assess affordability differently. Ask which test applies to the product you are looking at.

Part 5 of 7

Deposit and interest only

No official source we read gives a standard deposit for a buy to let mortgage, so we do not quote one. The deposit depends on the lender, the product and the rent test above, because a high loan can fail the rent test even when the deposit looks generous. Ask a lender or broker for the maximum loan to value on the exact product. We also give no figure for how many landlords choose interest only, because we found no sourced one.

Part 6 of 7

Is a buy to let mortgage regulated?

It depends on the type. The Financial Conduct Authority's page on checking a firm says consumer buy to let mortgages, for example for an accidental landlord, are products it supervises, and firms offering them must be registered. It lists other buy to let mortgages as products it neither regulates nor supervises. If you rent out a home you used to live in, you may be in the first group. A mortgage adviser should be able to say which applies, and you can check any firm on the FCA register.

Part 7 of 7

Before you apply

Work out your rent from real local lets, not hope. Our stamp duty on a second home page covers the extra purchase tax.
Check capital gains tax when you sell and the rules in EPC rules for landlords.
Compare at least two lenders or ask a regulated broker, and read the early repayment charges.
Keep a cash buffer for empty months.

This page is general information, not advice.

Our take

Test the rent before you fall for the property

The test lenders apply is mainly on the rent, not your pay. In the worked example on this page, £900 a month of rent supports a loan of up to £157,091 at 125% cover but only £135,423 at 145%. The common mistake is finding the property first and the borrowing limit second.

Our property deal analyser is a free BTL, HMO and BRR ROI calculator anchored to a value range, so you can see what a purchase returns before you commit to a mortgage. Pair it with the stress test above to check the loan and the return together.

Analyse the deal

Our opinion, drawn from the facts on this page: not advice and not a forecast. We earn from OfferCheck reports and from introducing sellers to cash buyers, so weigh it with that in mind (see our disclosure). We are not authorised or regulated by the FCA.

Questions, answered

Frequently asked questions

How does a buy to let mortgage work?

It is a loan to buy a property you will rent out. The lender checks that the expected rent covers the mortgage interest at a stressed rate by a set margin, the interest cover ratio, as well as your own circumstances.

What is the interest cover ratio?

The Bank of England defines it as rental income divided by the interest paid on the mortgage. It says lenders tend to test at a minimum of 125% and have tended to test higher-rate taxpayers to 145%.

How big a deposit do I need for a buy to let mortgage?

We found no official figure, so we do not quote one. It depends on the lender and product, and the loan must also pass the rent test. Ask a lender or broker for the maximum loan to value on the exact product.

Are buy to let mortgages regulated?

The FCA supervises consumer buy to let mortgages, and firms must be registered. It lists other buy to let mortgages as products it neither regulates nor supervises. Check which type you have with an adviser.

Does a higher interest cover ratio mean a smaller loan?

Yes, on the same rent. With £900 a month and a 5.5% stressed rate, the test allows about £157,091 at 125% and £135,423 at 145%. Lenders set their own rates and criteria, so this is an illustration only.

Where this comes from

Sources

Last reviewed 4 November 2026 by the Your Property Check team. This page is general information, not legal, tax or financial advice. For your own situation, speak to a conveyancing solicitor or another qualified professional.