A buy-to-let mortgage application in the UK barely looks at your personal salary at all. What actually decides how much you can borrow is whether the property's own rental income clears a stress-tested coverage threshold — and that threshold changes depending on whether you own the property personally or through a limited company.
How the Interest Coverage Ratio Works
The Interest Coverage Ratio (ICR) tests whether rental income covers the mortgage interest by a set margin, calculated at a stressed interest rate — not the actual rate you'll pay. The two common thresholds:
- 145% ICR, typically applied to higher-rate personal landlords
- 125% ICR, typically applied to limited company (SPV) ownership or basic-rate taxpayers
Both are calculated against a stress rate, commonly around 5.5%, regardless of the actual product rate on offer — similar in spirit to the residential mortgage stress test, but built entirely around the property's rent rather than the borrower's income.
Worked Example
A £300,000 buy-to-let mortgage, stress rate 5.5%:
| Factor | 145% ICR (Personal, Higher-Rate) | 125% ICR (Ltd Company / Basic-Rate) |
|---|---|---|
| Stressed annual interest | £300,000 × 5.5% = £16,500 | £16,500 |
| Required annual rent | £16,500 × 1.45 = £23,925 | £16,500 × 1.25 = £20,625 |
| Required Monthly Rent | ≈ £1,994 | ≈ £1,719 |
If the property actually rents for £1,800/month, it clears the 125% test comfortably but fails the 145% test outright — the same property, same loan, same borrower, producing two completely different outcomes purely based on ownership structure.
Common Mistakes
Landlords frequently assume their personal income and credit profile drive BTL affordability the way it does for a residential mortgage — it's a secondary factor at most; the property's rent against the ICR test is what actually sets the loan size.
Landlords also compare products purely on rate without checking the stress rate and ICR threshold behind each one — a slightly higher headline rate paired with a lower stress rate or ICR requirement can actually unlock more borrowing than a cheaper-looking product with a stricter test.
A third mistake: not accounting for how a shorter fixed-rate deal is often stressed at a higher rate than a longer one, which directly reduces borrowing capacity — a 5-year fix stressed at a lower rate than a 2-year fix, on identical rental income, can support a meaningfully larger loan.
Where This Calculator Has Limits
It uses common ICR benchmarks, but individual lenders set their own specific thresholds and stress rates, which shift with the market — some also offer "top-slicing," using surplus personal income to bridge a rental shortfall, which this simple calculation doesn't model. It also doesn't account for portfolio landlords, where multiple properties' rental coverage may be assessed together rather than loan by loan.
Frequently Asked Questions
Does my salary matter at all for a BTL mortgage?
It can factor in as a secondary consideration, particularly for first-time landlords or through top-slicing arrangements, but the rental ICR test is the primary qualifying mechanism.
Why is the stress rate higher than the actual mortgage rate?
It builds in a safety margin in case rates rise during the term, similar in purpose to the residential mortgage stress test, ensuring the rent could still cover a higher future rate.
Is a limited company structure always better for borrowing power?
It often allows a lower ICR threshold, which increases borrowing capacity on the same rent — but it comes with its own tax and administrative considerations worth weighing separately, not purely a borrowing decision.
Does a longer fixed-rate term always mean a lower stress rate?
Commonly, yes — five-year fixes are often stressed at a lower rate than two-year fixes, which can materially increase how much a lender will offer on identical rental income.
What happens if my rental income doesn't meet the ICR test?
The loan amount gets capped to whatever the rent can support at the required ratio, regardless of your personal financial strength — some lenders offer top-slicing to bridge a modest gap using other income.
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LTV Calculator · Amortization Calculator · Mortgage Calculator
Educational content, not financial or tax advice. ICR thresholds, stress rates, and BTL lending criteria vary by lender and change with the market — confirm current requirements with a licensed UK mortgage adviser or specialist BTL broker. Written by the MortgagePro Global team.