Rental Stress Test Calculator
Rental Stress Test Calculator
Before a lender approves a buy-to-let or HMO mortgage, they don't just look at the property value. They check whether the rent comfortably covers the mortgage payments, even if interest rates rise. This is called a rental stress test, and it's often the thing that decides how much you can actually borrow. Use the calculator below to get an instant estimate of the maximum loan your rent will support, and see straight away whether the amount you're hoping to borrow stacks up.
Enter your figures below. We'll work out the implied loan-to-value and tell you the maximum loan the rent can support against your chosen stress rate and coverage.
How the stress test works
Lenders use two numbers to work out the maximum loan rent can support:
The stress rate is the interest rate the lender tests your mortgage against. It's usually higher than the rate you'll actually pay, so they can be confident the rent still covers the payments if rates go up.
The coverage ratio (also called ICR) is how much higher the rent needs to be than the stressed mortgage payment. A 125% coverage ratio means the rent has to be at least 1.25 times the payment. Personal and limited company borrowers, and higher and lower rate taxpayers, are often tested at different coverage levels.
Put simply: the higher the stress rate and the higher the coverage ratio, the more rent you need to support the same loan. Our calculator does the maths for you so you can see where you stand in seconds.
What your result tells you
The calculator gives you four things:
Your target loan and implied LTV, so you can see how much you want to borrow as a percentage of the property value.
The maximum loan the rent supports, based on the stress rate and coverage you entered.
The rent required to support the loan you're after, so if you fall short, you know exactly how much more rent you'd need, or how much less you'd need to borrow.
If your target loan is below the maximum, the deal is likely to pass a lender's rental stress test. If it's above, you may need a larger deposit, a lender with more flexible criteria, or a different product. That's where we come in.
Numbers not quite stacking up?
A failed stress test on a high-street calculator doesn't mean the deal is dead. Stress rates and coverage ratios vary a lot between lenders, and the right product can make all the difference, especially for HMOs, limited company purchases, and portfolio landlords.
At Ramsay & White, we have access to lenders across the whole market and we know which ones suit which deals. Send us your figures and we'll tell you what's actually achievable.
This calculator is a guide only. The figures are indicative and do not account for every lender's policy or underwriting factors. Actual borrowing depends on a full assessment of your circumstances, the property, and the lender's criteria at the time. Always confirm eligibility and affordability with your adviser and conveyancer before committing to a purchase.Your home or property may be repossessed if you do not keep up repayments on a mortgage secured against it.
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