Use this calculator to work out your buy-to-let mortgage repayments for an interest-only mortgage.
Buy-to-Let Interest Only Repayment Calculator 🏠
How To Use the Calculator
Fill in the required fields:
- Mortgage amount
- Remember this is just the mortgage amount and not the purchase price.
- How many years is the mortgage?
- The most common mortgage length is 25 years but some lenders offer longer terms too of 30 or 35 years.
- Interest rate
- This depends on your mortgage product. You can find a range of mortgage rates for different types of buy-to-let mortgages at Money Facts Compare.
Once you’ve plugged in your values sometimes you might need to click somewhere on the page to populate the results.
See how your numbers stack up for your buy-to-let mortgage product and whether the numbers stack up.
You can use your results in a rental yield calculator to analyse your deal further.
💡 If you would prefer to compare two interest rates side by side then use our interest rate comparison calculator where you can compare monthly and annual payments.
If the numbers don’t look good then change things around to see what you would need to do to make your investment or mortgage product align with your goals.
What’s The Minimum Rent Target (ICR 125%)?
The minimum rent target is 125% of the monthly interest payment and this serves as a general rule of thumb that lenders use to help approve buy-to-let mortgages.
💡 This number is used as part of buy-to-let stress tests. Check out my Buy-to-Let stress test calculator to find out more.
But remember that this is on the lower end and depending on your circumstances the minimum rent needed could be higher.
We also call this the Interest Cover Ratio (or ICR) too and the ratio tends to be anywhere from 125% up to 170%. The most common range is 125% to 140%.
In the calculator, I’ve only included the lower end of the requirement which is 125%.
If your situation requires a higher ICR you should check what your minimum rent target will be.
💡 You can work it out by doing this:
Minimum Rent Target = Monthly Interest payment x ICR multiplier
The ICR multiplier would just be your interest cover ratio divided by 100.
e.g. If the Interest Cover Ratio is 140% then the ICR multiplier is 1.4x
See this post by The Mortgage Works to find out a bit more about their minimum lending criteria (other lenders may have different requirements).
Using an Interest Cover Ratio helps ensure that the rental income covers the mortgage comfortably and provides a buffer for potential fluctuations or unexpected costs.
Lenders can use this rule to minimize risk, but it’s not just good for lenders.
It’s good for you as a landlord too because it makes sure you have a buffer in case things go south.
Further Reading
When looking at mortgage products you should also consider what interest rates could be in 5,10 or 20 years time.
None of us have a crystal ball, but you can look at historic interest rates in the UK to get an idea of what the averages have been in the past. You’d might be surprised.
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