Rental Stress Test Calculator
Test whether rent covers mortgage interest at a stressed rate, the calculation lenders use to size a buy-to-let loan, and find your maximum loan.
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Lenders do not size a buy-to-let loan on the rate you are being offered. They apply a stressed rate, well above it, and require the rent to cover the interest at that stressed rate by a margin — typically 125% or more. That test, not the property price, usually determines how much you can borrow.
Running it yourself before applying tells you the real ceiling, and whether the deposit you have planned is actually large enough.
The calculation
Monthly stressed interest = loan × stressed rate ÷ 12. Rent required = that interest × the cover percentage. Rearranged, the largest loan a given rent supports is (rent ÷ cover) × 12 ÷ stressed rate.
Worked example
A 200,000 loan stressed at 8% costs 1,333 a month in interest. At 125% cover, the rent must reach 1,667. A property renting at 1,600 gives cover of 120% and fails by 67 a month. At that rent the largest loan supported is about 192,000 — so the deposit has to grow by 8,000 to make the purchase work.
Interest only, not full payment
The test uses interest rather than the full repayment, because most buy-to-let lending is interest-only. If you intend to repay capital as well, the actual monthly cost is considerably higher than the figure being stressed, and your own cash flow projection should use that.
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Create your free property pageFrequently asked questions
Why do lenders stress at a rate I am not paying?
Because the loan may outlive the current rate. Stressing at a much higher rate tests whether the rent would still cover the interest if rates rise before the property is sold or refinanced.
What cover ratio is typical?
Commonly 125% for basic-rate taxpayers and 145% or more for higher-rate ones in markets where tax relief is restricted. Portfolio landlords and limited-company structures are often tested differently again.
What can I do if the property fails the test?
Increase the deposit so the loan is smaller, find a lender with a lower stress rate, or choose a property with a stronger rent-to-price ratio. Assuming a higher rent than the market supports is the one option that reliably ends badly.
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