How Much You Can Borrow for a Buy to Let, and Why Rent Decides It

For a purchase, how much you can borrow on a buy to let is set mainly by the rent the property will earn, not by your salary. The lender takes the expected rent, charges notional interest at a stressed rate higher than the one you will pay, and requires the rent to cover that interest by a set margin, called the interest coverage ratio.

The loan is then capped a second time by loan to value, so the smaller of the two figures is your ceiling and the rest of the price is your deposit. Your tax band, whether you buy through a company and whether the lender will count your personal income all move the answer, and the worked examples below show by how much.

How rent sets what you can borrow

The Prudential Regulation Authority, which supervises banks and building societies, defines the interest coverage ratio as the expected monthly rent divided by the monthly interest, with that interest worked out at a rate that allows for future rises. Turn it round and it gives a maximum loan. Divide a year’s rent by the ratio multiplied by the stress rate, and the result is the most the rent will support.

That is a different starting point from a home loan, where lenders begin from multiples of your income, as our guide to what a first-time buyer can borrow sets out. On a buy to let the property has to carry the debt. The regulator also tells lenders not to base affordability on the equity in the property or on any future rise in its price, so a hoped-for uplift adds nothing to the loan.

Every figure in this example is an assumption chosen to show the mechanics, not a quote from any lender. The purchase is £200,000 and the lender lends up to 75% loan to value, which caps the loan at £150,000. The coverage ratios are 125%, 145% and 160%. The stress rates are 5.5%, the regulator’s minimum, and 6.5%, which is an assumed 4.5% product rate plus the 2 percentage point rise the regulator tells lenders to allow for on a rate fixed for less than five years.

• At £900 a month rent, a 5.5% stress rate and a 125% ratio, the rent supports £157,091, so the £150,000 loan to value cap binds and the deposit is £50,000.
• At the same rent and rate with a 145% ratio, the rent supports £135,423, which now binds, and the deposit rises to £64,577. At 160% the loan is £122,727 and the deposit £77,273.
• At £900 a month and a 6.5% stress rate, the loan falls to £132,923 at 125%, £114,589 at 145% and £103,846 at 160%. That last case needs a deposit of £96,154, just over 48% of the price.
• At £1,150 a month the loan to value cap binds in most combinations. Only at the 6.5% stress rate with the two higher ratios does the rent bind again, at £146,419 and £132,692.

On a strong rent the loan to value cap takes over, and extra rent stops adding borrowing.

The PRA’s buy to let affordability rules

The rules sit in the PRA’s supervisory statement SS13/16 on underwriting standards for buy to let mortgage contracts, first published in September 2016, and that version is still the current one. A revised version takes effect on 1 January 2027, with the affordability tests described here unchanged.

As minimum expectations of the lenders it covers, the regulator requires a test of whether the rent supports the interest, or a fuller income test where personal income is used, or both:

• Rent must be verified by an independent qualified valuer, an automated valuation model or an existing tenancy agreement, so the rent you hope to achieve is not automatically the rent used.
• The stressed rate must reflect likely rates over at least five years, with regard to a minimum 2 percentage point rise, and must not be assumed below 5.5% during the first five years.
• Any assumed rent growth is limited to 2% a year, and borrowers with four or more mortgaged buy to let properties are treated as portfolio landlords with a specialist assessment.

What the regulator does not set is a minimum coverage ratio. It records 125% as the industry standard, says it does not expect its standards to push thresholds lower, and tells lenders to allow for letting costs and the tax on the property, which may push them higher.

In its 2016 policy statement it said it did not want to be prescriptive about how lenders set that threshold, and left lenders to choose whether the stressed rate starts from the initial product rate or the reversion rate. The ratio you face and the loan to value cap are lender decisions.

The five year exception matters on a purchase. The look forward does not apply where the rate is fixed for five years or more, although the regulator still expects lenders to consider refinancing risk when the fix ends.

On their broker criteria pages, The Mortgage Works, a Nationwide lender, tests a personal five year fixed purchase above 65% loan to value at the higher of 4.5% and the pay rate, and LendInvest assesses its five year fixes at the pay rate. Those are two lenders’ choices, not a market rule, and both are lenders selling those products, so check the criteria of the lender your broker proposes.

The statement does not cover buy to let that is not taken out for the purposes of a business, which the Financial Conduct Authority regulates as consumer buy to let. Nor does it apply to a like for like remortgage with no extra borrowing, which is why The Mortgage Works can test those more lightly than a purchase, and our guide to the buy to let remortgage stress test covers that side.

Bank Rate does not move the floor. Bank Rate stood at 3.75% on the Bank of England’s own daily series on 11 September 2026, unchanged since 18 December 2025. The Bank held it there again on 17 September 2026, and its next decision is due on 5 November 2026.

When the PRA set the 5.5% minimum it said there should be no mechanical link between that figure and Bank Rate, and that it would consult before changing the stressed rate.

Basic rate, higher rate or a company

Tax is part of the test because the regulator tells lenders to account for the tax on the property, including the treatment of mortgage interest.

For an individual landlord, mortgage interest is no longer deducted when rental profit is calculated for income tax under section 272A of the Income Tax (Trading and Other Income) Act 2005. Relief comes instead as a reduction in the tax bill, worked out at a basic rate however high the landlord’s own band.

A higher rate taxpayer therefore keeps less of each pound of rent, and lenders ask for more rent to cover the same interest.

That changes from the 2027-28 tax year. Under Finance Act 2026 the relief is worked out at the new property basic rate of 22%, and taxpayers in England and Northern Ireland pay property rates of 22%, 42% and 47% on rental profit, two points above today’s rates. Scottish taxpayers pay Scottish rates on this income. Anyone borrowing on a fix that runs past April 2027 should check the lender’s affordability test and their own sums against those rates.

How much more varies by lender:

• LendInvest’s criteria, dated June 2026, set 125% for basic rate taxpayers and limited companies on single properties, and 140% for higher and additional rate taxpayers.
• The Mortgage Works sets 125% for limited companies and for lower rate taxpayers declaring gross income under £50,271, and 160% for higher rate taxpayers, and it treats any personal applicant with more than three rental properties as a higher rate taxpayer.

The regulator also lets lenders simply assume every borrower pays higher rate tax, while warning that this may mean declining borrowers who would otherwise qualify. In the worked example, the gap between a 125% and a 160% ratio on £900 of rent at a 5.5% stress rate is £27,273 of extra deposit on the same property.

Companies are outside that restriction, and both lenders above apply their lowest ratio to company borrowers. The PRA’s standards still apply as a minimum whether the borrower is an individual or a company, so a company still faces a stressed rate and a coverage test. Whether buying through a company pays depends on far more than the loan size, which our guide to buying property through a limited company works through.

Top slicing from personal income

Top slicing means using your own income to make up a shortfall when the rent alone does not cover the stressed interest by the lender’s ratio. The regulator allows it, but only through a full income affordability test. That test takes your personal income net of tax and national insurance, your other credit commitments with their mortgage payments stressed, your essential spending and living costs, and any change the lender knows about during the term, such as retirement.

Whether it is offered at all is the lender’s choice. The Mortgage Works states on its criteria page that it does not allow surplus earned income to cover a rental shortfall, so ask your broker which lenders offer top slicing before assuming it is available.

In the worked example, a £1,150 rent at a 6.5% stress rate and a 160% ratio supports £132,692. To reach the full £150,000 the rent would need to be £1,300 a month, a shortfall of £150 a month or £1,800 a year. That is the gap personal income would have to bridge, and the lender’s own affordability test decides how much of your income counts towards it.

What this means for property investors

Run the sum yourself before you make an offer. Multiply the monthly rent a valuer would accept by 12, then divide it by the coverage ratio multiplied by the stress rate, written as decimals, so 1.45 times 0.055. Multiply the price by the lender’s loan to value cap and take the lower of the two results. The price minus that figure is your deposit, before stamp duty, fees and the cost of getting the property let.

Run it at 125% and at the ratio that fits your own tax position, and at 5.5% and at a higher stress rate, because your lender’s figures will not be the ones in this article. If a deal only works at the lowest ratio and the lowest rate, the borrowing is fragile.

The case against borrowing the maximum deserves its full weight. A maximum loan is a ceiling, not a target.

The stress test exists because rates rise, and a purchase borrowed to the limit leaves less room for a void, a repair or a refinance at a higher rate, which our look at whether buy to let is worth it in 2026 weighs up. A bigger deposit or a cheaper property can be a better answer than hunting for the lender with the lowest ratio.

Lender criteria change often and differ widely, so speak to a mortgage broker or adviser who can compare lenders for your circumstances before you commit to a purchase.

This is general information, not advice on your situation, so take independent advice before acting.

To try the sum on real stock, browse our current investment properties for sale.