BTL mortgage stress test
The stress test is the number one reason first buy-to-let deals collapse. Lenders don't ask whether the rent covers your actual mortgage payment. They ask whether it covers a higher, stressed version of it, with margin on top. Check your deal before a broker does.
Stress rate auto-set to pay rate + 2% with a 5.5% floor, which is the common pattern. Five-year fixes are often stressed at the pay rate itself, so edit it to match a real quote.
How will you own it?
Fails the stress test
Rent needed for a £150,000 loan
£1,016 / month
Max loan your £950 rent supports
£140,308
The gap: you need £66 more rent a month, or £9,692 less borrowing (a bigger deposit), or a product with a lower stress rate.
At 125% (basic rate / company)
needs £1,016/mo · max £140,308
At 145% (higher rate)
needs £1,178/mo · max £120,955
Deal not quite stacking? Post the numbers in the free Discord and get honest second opinions before you commit.
Ask in the free Discordⓘ ICR thresholds and stress rates vary by lender and product; these are the typical market patterns, not any specific lender's criteria. Some lenders also consider your personal income (top-slicing) when rent falls short. Education, not mortgage advice: a whole-of-market, FCA-authorised broker will know which lenders fit your exact case.
How the test works: lenders multiply your loan by a stressed interest rate, then require the annual rent to be 125% (basic-rate taxpayers and limited companies) or 145% (higher-rate taxpayers) of that figure. It's called the Interest Coverage Ratio, or ICR. If the rent falls short, they lend less than you asked for, and the deal breaks unless you find a bigger deposit.
Why limited companies pass more easily: the 125% test, not tax magic. Whether a company actually saves you money overall is a separate question for an accountant.
Work out whether the deal makes money (not just whether it borrows) with the yield checker and the total cash needed calculator. Education, not mortgage advice: for the real lending decision, speak to an FCA-authorised broker.