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

Most BTL lenders require a minimum 25% deposit (75% LTV). A larger deposit of 35–40% secures better rates and makes passing the ICR stress test easier.

What is the ICR stress test and how do I pass it?

The ICR requires monthly rent to cover at least 125% of mortgage interest (145% for higher-rate taxpayers). Increase deposit, choose higher-rent property, or find a lender with lower ICR requirements.

What tax do I pay on rental income?

Rental income is taxed at your marginal rate. Since 2020, mortgage interest is not fully deductible — you receive a 20% tax credit instead (Section 24). Many landlords use limited companies for full deductibility.

What is a good rental yield for UK buy-to-let?

A gross yield of 5–8% is generally good for UK BTL. London yields 3–5%; Northern cities often yield 6–8%. Net yield is typically 1–2% lower than gross.

Buy-to-Let Calculator

Q: Do I need a special mortgage for a buy-to-let?

Yes. Using a residential mortgage on a let property is mortgage fraud. BTL mortgages have different criteria based on rental income rather than personal income.

Calculate rental yield, monthly cash flow, and interest coverage ratio for UK buy-to-let investments. Includes management fees, void periods, and ICR stress test.

Property Value

Deposit

£25%

Interest Rate

Monthly Rent

Monthly Cash Flow

£29

After interest-only mortgage, management, voids, and maintenance

Gross Yield

5.76%

Net Yield

4.26%

ICR (Interest Cover)

1.40x

LTV

75.0%

Monthly Interest (IO)

£859

Monthly Repayment

£1,151

Annual Rent (net voids)

£13,846

Annual Cash Flow

£349

How to Use This Buy-to-Let Calculator

Enter your Property Value, Deposit, Interest Rate, and expected Monthly Rent. Click "More options" to add management fees, void periods, maintenance, and insurance for a realistic cash flow picture.

Understanding ICR (Interest Coverage Ratio)

The ICR (also called rental cover or stress test) measures how well your rental income covers the mortgage interest. Most BTL lenders require ICR of at least 125% — meaning rent must be at least 125% of the monthly interest payment. Higher-rate taxpayers often face a 145% ICR requirement.

IO vs Repayment for BTL

Most buy-to-let mortgages are interest-only. This keeps monthly outgoings lower and maximises cash flow, but the capital remains outstanding at term end. The monthly cash flow shown is based on interest-only; the repayment figure is shown for comparison.

Gross vs Net Yield

Gross yield = annual rent / property value. Net yield = (annual rent minus management, maintenance, insurance) / property value. Net yield is what you actually earn before mortgage costs.

BTL Key Formulas

Gross Yield = (Monthly Rent × 12) / Property Value × 100

Net Yield = (Annual Rent − Management − Maintenance − Insurance)
/ Property Value × 100

ICR = Monthly Rent / Monthly Interest Payment
(Lenders require ≥ 1.25x, often 1.45x for higher-rate taxpayers)

Monthly Cash Flow = Net Annual Rent − Annual Costs) / 12

Example: BTL in Birmingham

Mark's First Buy-to-Let Investment

Mark is buying a £180,000 terrace in Birmingham city centre. He expects £900/month in rent with a 10% management fee.

Property Value	£180,000
Deposit (25%)	£45,000
BTL Mortgage (75% LTV)	£135,000
Interest Rate (IO)	5.5%
Monthly Interest	£619
Monthly Rent	£900
Management Fees (10%)	£90/mo
Voids (2 weeks)	£35/mo
Maintenance + Insurance	£150/mo
Monthly Cash Flow	+£6/mo
Gross Yield	6.0%
ICR	1.45x (passes 125% test)

Mark's investment is marginally cash-flow positive but the real return comes from long-term capital growth. If he refinances or rates fall, cash flow improves significantly.

Frequently Asked Questions

Most BTL lenders require a minimum 25% deposit (75% LTV). Some specialist lenders accept 20%, but at higher rates. A larger deposit (35–40%) typically secures significantly better interest rates and makes the ICR test easier to pass. Unlike residential mortgages, there are very few 90% or 95% LTV BTL products available.

The Interest Coverage Ratio (ICR) stress test requires your monthly rent to cover at least 125% of your monthly mortgage interest (145% for higher-rate taxpayers with many lenders). Some lenders also stress-test at a higher notional rate (e.g., 5.5% even if your actual rate is lower). To pass: increase your deposit to reduce loan size, choose a higher-rent property, or find a lender with a lower ICR requirement.

Rental income is subject to Income Tax at your marginal rate (20%, 40%, or 45%). Since 2020, landlords cannot deduct mortgage interest as an expense — instead you get a 20% tax credit (Section 24). This means higher-rate taxpayers pay significantly more tax on BTL income than before. Many landlords now hold BTL properties in a limited company to access full mortgage interest deductibility at corporation tax rates.

Yes. You cannot use a standard residential mortgage for a property you intend to let out — this constitutes mortgage fraud. BTL mortgages have different criteria: they assess rental income rather than personal income (though some lenders also check personal income), require higher deposits, and are typically interest-only. Always disclose your intention to let when applying for a mortgage.

A gross yield of 5–8% is generally considered good for UK buy-to-let, though this varies significantly by region. London typically yields 3–5% (lower yields but historically stronger capital growth). Northern cities like Manchester, Liverpool, and Birmingham often yield 6–8%. The North East and parts of Scotland can yield over 8%. Net yield (after costs) is typically 1–2% lower than gross yield.