Buy-to-Let Mortgage Stress Test (ICR)

The interest coverage ratio (ICR) is the rent divided by the mortgage interest, expressed as a percentage. Lenders want the rent to cover the interest by a comfortable margin, so a typical requirement is 125% or 145%. If the rent is £1,200 and the stressed interest is £800, the ICR is 150%.

It depends on your tax position. Limited companies and basic-rate individual landlords are usually stressed at 125%, while higher-rate and additional-rate individuals are stressed at 145% because Section 24 leaves them with less after tax. Set the ownership and tax band above to use the right threshold.

For a mortgage the lender typically stresses at the higher of your pay rate plus 2% and a floor of about 5.5%, though five-year fixes are often assessed at the actual pay rate. This tool uses the higher of pay rate + 2% and 5.5%. Longer fixes can be assessed more generously, so treat the result as a conservative guide.

The rent has to cover the stressed interest at the required ICR, so the maximum loan is driven by the rent, the stress rate and the threshold, not just the property value. The calculator shows the largest loan the rent supports at your threshold - the lender will also cap you by loan-to-value, usually 75%.