What is the interest coverage ratio (ICR) on a buy-to-let mortgage?

The ICR is the percentage of the mortgage interest payment that your rent must cover at the lender's stress rate. Basic-rate taxpayers are typically assessed at 125%, higher-rate taxpayers at 145%, and many lenders use 125% for limited company borrowing.

What stress rate do buy-to-let lenders use?

Most lenders stress-test at around 5.5%, or roughly 2% above the product rate, whichever is higher. Five-year fixed products are often assessed at the pay rate instead, which is why longer fixes can unlock a larger loan on the same rent.

Should I take interest-only or repayment?

Interest-only maximises monthly cash flow and is the norm for buy-to-let, but the capital is still owed at the end of the term. Repayment costs more each month and builds equity. Many landlords use interest-only during a growth phase and move to repayment once the portfolio is established.

How much deposit do I need for a buy-to-let?

Typically 25% of the property value, though the sharpest rates usually start at a 40% deposit. HMO and limited company products often require more. Stamp duty, legal fees and refurbishment sit on top of the deposit.

Why does my rent fail the stress test?

Either the loan is too large for the rent or the stress rate is high relative to the yield. Options are to increase the deposit, choose a five-year fixed product assessed at pay rate, use top-slicing where the lender allows surplus personal income, or buy higher-yielding stock.

When should I start looking at remortgaging?

Around six months before your current fixed rate ends. That leaves time to compare products, get a valuation and complete without slipping onto the lender's standard variable rate, which is usually far more expensive.

Buy-to-let mortgage calculator

Compare interest-only and capital repayment costs on a buy-to-let loan, then check the rent against the lender's interest coverage ratio stress test before you make an offer.

By the NestIQ Wealth editorial teamPublished August 2026Last reviewed August 2026

Loan details

Property price

Deposit

Most buy-to-let lenders want at least 25%

Interest rate

The product pay rate

Term

yrs

Used for the repayment comparison

Monthly rent

Lender stress test

Stress rate

Typically 5.5%, or pay rate on a 5-year fix

Interest coverage ratio

Monthly cost

£820

Interest only

£1,124

Repayment

Loan amount£187,500

Loan to value75.00%

Total interest over term (repayment)£149,577

Monthly surplus — interest only£380

Monthly surplus — repayment£76

Stress test

Rent falls short

The lender needs £1,246 per month at 145% coverage on a 5.50% stress rate. You have entered £1,200.

Stressed monthly interest£859

Rent required£1,246

Maximum loan on this rent£180,564

Indicative only. Lenders apply their own criteria, fees and top-slicing rules — speak to a qualified broker before relying on these figures.

Assumptions & sources

Every figure above is calculated from the inputs you entered using the rules below. Tap a reference to read the primary source.

Interest-only payment[1]
Monthly cost is loan x rate / 12; repayment uses the standard amortisation formula.
Interest cover ratio[2]
Lenders test rent against interest at a stressed rate, typically 125% for basic-rate and 145% for higher-rate landlords.
Stress rate floor[2]
PRA underwriting standards require a stressed rate assumption of at least 5.5% in most cases.
Finance cost relief[3]
Mortgage interest is relieved at 20% basic rate, not deducted from rental profit.

[1]MCOB: responsible lending and affordabilityFinancial Conduct Authority — Mortgage affordability assessment principles
[2]SS13/16: Underwriting standards for buy-to-let mortgage contractsBank of England Prudential Regulation Authority — Interest cover ratio and stress-rate expectations
[3]Tax relief for residential landlords: how it's worked outHMRC — Basic-rate finance cost relief treatment

Read how we verify and refresh these figures in our data methodology.

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Frequently asked questions

More free landlord tools

Rental yield calculator

Gross yield, net yield and cash-on-cash return for any UK buy-to-let.

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HMO yield calculator

Room-by-room income, bills, voids and licensing costs for an HMO.

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Stamp duty (SDLT) calculator

England & NI stamp duty including the 5% additional-property surcharge.

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About the publisher

This page is published by NestIQ Wealth, a UK property management and compliance platform used by self-managing landlords to track statutory deadlines, store certificates with full version history, and evidence compliance per property. Our guidance is written by the team that builds those compliance rules into the product, so the dates, cycles and penalties here are the same ones the software enforces.

•Researched from primary sources. Every rule is checked against legislation.gov.uk, GOV.UK guidance and the responsible regulator — never rewritten from other blogs. See how we source our data.
•Reviewed as the law changes. Pages carry a visible review date and are revisited when legislation, deadlines or penalty levels move.
•No hidden commission. We are not paid to refer you to contractors, brokers or agents. Costs quoted are illustrative market ranges, not quotes or offers.
•Guidance, not regulated advice. Nothing here is legal, tax or financial advice. For decisions specific to your circumstances, speak to a solicitor, accountant or qualified adviser.

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