Buy-to-Let Mortgage Calculator
Calculate UK buy-to-let mortgage repayments, LTV ratio, gross and net rental yield, and rental coverage ratio for investment property financing.
About the Buy-to-Let Mortgage Calculator
Buy-to-let (BTL) mortgages are specialist mortgage products available to landlords purchasing residential property to rent out to tenants. They differ from residential mortgages in several important ways: lenders assess affordability primarily based on projected rental income rather than personal salary; minimum deposits are typically 25% (75% LTV); and interest rates are generally 0.5–1.5% higher than equivalent residential mortgages, reflecting the additional risk.
Rental yield is the key metric for assessing a buy-to-let investment. Gross yield is annual rent divided by property value — a simple but useful starting point. Net yield subtracts ongoing costs (management fees, maintenance, insurance, void periods) and mortgage payments before dividing by property value, giving a more realistic picture of actual returns. Most experienced BTL investors target a net yield of 4–6% in addition to any capital growth.
Lenders use a rental coverage ratio (also called interest coverage ratio or ICR) to assess affordability. Most BTL lenders require rent to cover at least 125–145% of the monthly interest payment. For example, if the monthly interest payment is £1,000, lenders want to see at least £1,250 in monthly rental income. This ensures the investment remains serviceable even with void periods and unexpected maintenance.
UK Buy-to-Let Tax Rules
Since April 2020, UK landlords can no longer deduct mortgage interest as a business expense for income tax purposes. Instead, a tax credit equal to 20% of mortgage interest payments is applied against the tax bill. For higher-rate taxpayers (40% or 45%), this means the effective tax on mortgage interest has increased significantly. Basic-rate taxpayers are largely unaffected. This change has led many landlords to consider holding BTL properties within a limited company structure, where mortgage interest remains fully deductible as a business expense.
Stamp Duty Land Tax (SDLT) on buy-to-let purchases includes a 3% surcharge over standard residential rates. For a £250,000 BTL purchase, SDLT would be approximately £10,000 (standard £2,500 plus £7,500 surcharge). This front-loaded cost significantly impacts returns, especially for lower-priced properties. Scotland and Wales have their own versions of this tax (LBTT and LTT respectively) with their own surcharges.
Capital Gains Tax (CGT) applies when you sell a buy-to-let property at a profit. For the 2024–25 tax year, residential property CGT rates are 18% (basic rate) and 24% (higher rate) on gains above the annual CGT allowance (£3,000 for 2024–25). Rollover relief and principal private residence relief do not apply to pure investment properties. Careful planning around timing and ownership structure can significantly reduce CGT liability.