1. What is Buy To Let Borrowing?

Buy To Let borrowing refers to loans taken out to purchase properties specifically for renting out to tenants. Lenders typically assess affordability based on the rental income the property can generate.

2. How Does the Calculator Work?

The calculator uses the Buy To Let formula:

Where:

• \( \text{Rental Income} \) — Expected monthly rental income in dollars
• \( \text{Rate} \) — Interest rate as decimal (e.g., 0.05 for 5%)
• 1.25 — Standard stress test multiplier used by lenders

Explanation: The equation calculates the maximum loan amount based on rental income coverage, with lenders typically requiring rental income to be 125% of the mortgage payment.

3. Importance of Buy To Let Calculations

Details: Accurate loan calculations help investors determine property affordability, assess potential returns, and meet lender requirements for buy-to-let mortgages.

4. Using the Calculator

Tips: Enter realistic rental income figures based on local market rates and the expected interest rate for your mortgage. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Why is there a 1.25 multiplier?
A: Lenders use this stress test to ensure rental income covers 125% of the mortgage payment as a safety margin.

Q2: What's a typical interest rate for buy-to-let?
A: Rates vary but are typically 1-2% higher than residential mortgages, often between 3-6% depending on market conditions.

Q3: Do lenders consider other factors?
A: Yes, most lenders also consider your personal income, credit score, and the property's potential rental yield.

Q4: How accurate is this calculation?
A: This provides a basic estimate; actual loan amounts may vary based on lender policies and your financial situation.

Q5: Can I use this for commercial properties?
A: No, commercial property loans use different criteria. This calculator is for residential buy-to-let properties.