Landlord

BTL ICR Calculator

Calculate Interest Coverage Ratio for Buy-to-Let mortgage stress testing. Check if your rental income meets lender requirements.

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About the BTL ICR Calculator

What it does and how it helps you

The BTL ICR Calculator helps UK landlords calculate Interest Coverage Ratio for buy-to-let mortgage applications. ICR is the key metric lenders use to assess BTL affordability, typically requiring rental income to cover 125-145% of mortgage interest at stress test rates. Our calculator instantly shows whether you meet lender requirements and calculates maximum borrowing based on your rental income.

Calculate ICR at lender stress test rates
Automatic ICR requirement based on tax status
Show maximum borrowing for your rental income
Calculate required rent for any loan amount
Compare personal vs limited company requirements

How It Works

Understanding the calculation method

Interest Coverage Ratio (ICR) is the most important affordability metric for buy-to-let mortgages in the UK. It measures how many times your rental income covers the mortgage interest payment.

The ICR Formula

ICR = (Annual Rent ÷ Annual Interest) × 100

For example, if your annual rent is £18,000 and annual interest is £12,000: ICR = (£18,000 ÷ £12,000) × 100 = 150%

UK Lender ICR Requirements

Most UK BTL lenders require minimum ICR of: - 125% for basic rate taxpayers and limited companies - 145% for higher rate (40%) and additional rate (45%) taxpayers - 145% for portfolio landlords (4+ mortgaged properties)

The Stress Test Rate

Critically, lenders don't use your actual mortgage rate for the ICR calculation. Instead, they use a "stress test rate" - typically 5.5% - regardless of what rate you're actually paying. This ensures you can afford the mortgage if rates rise significantly.

Why Higher Rate Taxpayers Need 145%

Section 24 restricts mortgage interest tax relief for personal landlords to 20%, even if you pay 40% or 45% tax. This means higher rate taxpayers lose more income to tax, so lenders require higher ICR (145% vs 125%) to compensate.

How This Calculator Works

1. Enter your property value and desired loan amount 2. Input the expected monthly rent 3. Select how you'll own the property (personal or company) 4. If personal, select your tax status 5. Confirm the stress test rate (default 5.5%)

The calculator shows: - Your ICR at the stress test rate - Whether you pass the lender requirement - Maximum loan amount at the required ICR - How much rent increase or loan reduction needed to pass

When to use this calculator

Use this calculator before approaching BTL lenders, when comparing properties to assess which you can finance, or when calculating maximum borrowing based on rental income. Essential for understanding if your BTL application will pass affordability tests before making an offer.

Frequently Asked Questions

Common questions about this calculator

Most UK BTL lenders require 125% ICR for basic rate taxpayers and limited companies, or 145% for higher/additional rate taxpayers. Portfolio landlords (4+ mortgaged properties) typically need 145% regardless of tax status. The ICR must be met at the lender's stress test rate (usually 5.5%), not your actual mortgage rate.
Section 24 restricts mortgage interest tax relief for personal landlords to 20%, meaning higher rate taxpayers lose more income to tax after the mortgage interest deduction. Lenders compensate by requiring higher ICR (145% vs 125%) to ensure affordability after tax. Limited companies avoid Section 24 entirely, so they only need 125%.
Most UK BTL lenders use 5.5% as the stress test rate, though some use higher rates (up to 7-8%). Even if your actual mortgage rate is 4.5%, lenders assess ICR at around 5.5%. This ensures you can afford payments if rates rise. The stress test became standard after PRA regulations in 2017.
Yes. Limited companies only need 125% ICR vs 145% for higher rate personal landlords because they're not affected by Section 24. However, BTL mortgages for companies often have higher interest rates, lower LTV limits, and you'll face corporation tax on profits. There are also setup and running costs. Seek professional advice before switching.
Several options exist: (1) Reduce loan amount - lower borrowing means lower interest payments. (2) Increase your deposit - same effect as reducing loan. (3) Find a property with higher rent - better rent-to-price ratio. (4) Use a limited company structure if you're a higher rate personal landlord. (5) Seek specialist lenders with more flexible criteria (often at higher rates). Even a small deposit increase can significantly improve ICR.

Related Property Terms

BTL ICR calculator UKInterest Coverage Ratio calculatorBTL stress test calculatorBuy-to-let affordability test125% ICR requirement145% ICR higher rateBTL mortgage calculator UKRental income stress testLimited company BTL ICRSection 24 ICR impact