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Guide 12 of 12

Buy to let: why the numbers work differently

The rent has to carry the loan — at a rate you are not actually paying.

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2 minute readLast reviewed 13 September 2026Written by an adviser

On a residential mortgage the lender asks what you can afford. On a buy to let it mostly asks what the property can afford, and it tests that against a rate well above the one you will be paying. This surprises people, and it is the reason a buy to let that looks comfortable on the numbers in your head can be declined.

The rental stress test

The lender takes the expected monthly rent and checks it covers the mortgage interest by a set margin, at an assumed rate rather than the actual one. Two figures drive it, and the lender sets both.

  • •The stress rate — the notional interest rate the calculation is run at. It is typically well above the product rate, and a five-year fix is usually tested a good deal more gently than a two-year one.
  • •The interest cover ratio — the margin by which the rent must exceed the interest. It commonly sits higher for higher-rate taxpayers than for basic-rate ones, and higher again for some property types.

Both vary enormously between lenders, which is why the same property and the same rent can support very different loan sizes depending on where the case goes. Our rental stress calculator lets you put a stress rate and a cover percentage in and see what loan the rent supports.

The rent that counts is the valuer’s figure, not the agent’s. The lender’s valuer gives their own opinion of the achievable market rent, and if it comes in below the letting agent’s estimate, the loan is recalculated on the lower figure.

Personal name or limited company

In your own nameThrough a limited companyMoving a property from one to the otherGet the tax advice firstHow it worksSimpler, usually a wider choice of lender, and often lower product fees. The tax position changed some years ago: finance costs are no longer deducted from rental income in the way they once were, and are instead relieved at the basic rate. For a higher-rate taxpayer that can matter a great deal.A different tax treatment, and one many landlords have moved to. It brings its own costs: company accounts, a narrower lender pool, usually higher rates and fees, and personal guarantees. Whether it is better depends on your tax position, your plans and how many properties you expect to hold.It is a sale and a purchase, not an administrative change. That usually means stamp duty and potentially capital gains tax. The cost of doing it needs working out properly before anybody commits.We arrange the mortgage; we are not tax advisers. Which structure is right is a question for your accountant, and it is much better answered before you buy than after.

What else the numbers have to carry

  • •Void periods. A property earns nothing between tenants, and the mortgage does not pause.
  • •Maintenance, and the boiler that will eventually fail.
  • •Letting agent fees, if you use one.
  • •Landlord insurance, which is not the same as ordinary buildings cover.
  • •Safety certification and compliance — gas, electrical, energy performance, smoke and carbon monoxide alarms, deposit protection.
  • •Tax on the rental profit.

Gross yield and net yield

Gross yield is the annual rent as a percentage of the purchase price, and it is the figure quoted in advertisements. Net yield takes the running costs off first, and it is the only one that tells you anything about whether the property earns its keep.

A high gross yield on a property with a long void history, a service charge and a roof due for replacement is not a high yield. It is an advertisement.

Most buy to let mortgages are not regulated by the Financial Conduct Authority. Your property may be repossessed if you do not keep up repayments. This guide is general information, not advice.

Carry on

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Send us the property and the expected rent.

We will run the stress test before you make an offer, so you know the maximum loan rather than hoping for it. Tax structure is a question for your accountant, and worth asking first.