Calculate Your Rental Cover Ratio
Rental Cover Ratio Analysis
Cover Ratio
Net Rental Income
Monthly Cashflow
Annual Cashflow
Investment Analysis
How to Use This Rental Cover Ratio Calculator
Follow these 6 simple steps to calculate your rental cover ratio (ICR) and determine if your buy-to-let property investment meets lender requirements for mortgage approval. Our calculator provides instant analysis of rental income coverage against mortgage payments.
Enter Monthly Rental Income
Input the expected monthly rental income for your buy-to-let property. Use the current market rent for the area, which you can research on Rightmove, Zoopla, or local letting agents. For example, if comparable properties in the area rent for £1,500/month, enter "1500".
💡 Lender Tip: Most lenders use 80% of market rent for ICR calculations to account for void periods. If market rent is £1,500/month, they'll calculate based on £1,200/month (£1,500 × 80%). Some lenders use 100% of rent, so check specific lender criteria. October 2025 average UK BTL rent: £1,200/month (£1,800 London, £950 regions).
Enter Monthly Mortgage Payment
Input your expected monthly mortgage payment. This is the interest-only or capital repayment amount you'll pay to the lender. For a £200,000 mortgage at 5.5% interest-only, the monthly payment is approximately £917. Use our Repayment Calculator to calculate exact payments.
⚠️ Important: Lenders calculate ICR using stressed interest rates (typically 5.5-6.5%), not your actual mortgage rate. Even if you secure a 4.5% rate, lenders will test affordability at 5.5-6.5% to ensure you can afford payments if rates rise. October 2025 typical BTL rates: 4.5-6.0% (75% LTV), 5.0-6.5% (80% LTV).
Enter Property Management Fees (Optional)
If you're using a letting agent, enter their monthly management fee. Typical fees are 10-15% of monthly rent plus VAT. For £1,500/month rent, expect £150-225/month (£1,500 × 10-15%). Self-managing landlords can leave this at £0, but should still budget for their time and expertise.
💡 Management Options: Full management (10-15%): Tenant finding, rent collection, maintenance, inspections. Tenant find only (6-8% + one-off fee): Find tenant, then you manage. Self-management: £0 fees but requires time, knowledge, and availability. Consider your experience and available time when deciding.
Enter Insurance and Maintenance Costs
Input monthly insurance costs (landlord insurance typically £30-80/month or £360-960/year) and maintenance reserve (recommended 10-15% of rent, or £100-200/month for a £1,500/month property). These costs ensure you're prepared for repairs, boiler servicing, safety certificates, and unexpected issues.
✅ Essential Costs: Landlord insurance (£360-960/year): Buildings, contents, liability, rent guarantee. Maintenance (10-15% of rent): Boiler servicing (£80-120/year), safety certificates (£150-300/year), repairs (£500-1,500/year average). Budget £1,500-3,000/year total for a typical BTL property.
Enter Void Period Allowance
Specify the percentage of time you expect the property to be vacant between tenancies. Typical void periods are 5-10% (approximately 2-5 weeks per year). In high-demand areas like London, voids may be 3-5%. In less desirable areas, budget 10-15%. For a £1,500/month property with 5% void allowance, you lose £900/year (£1,500 × 12 × 5%).
💡 Minimizing Voids: Good property management reduces voids to 3-5%. Strategies: Competitive pricing, excellent property condition, quick tenant referencing, overlap tenancies where possible, flexible move-in dates, professional marketing. Student properties: Higher voids (15-20%) due to academic calendar. HMOs: Lower voids (2-5%) with rolling tenancies.
Review Your Rental Cover Ratio Results
Click "Calculate Cover Ratio" to see your results. The calculator shows: (1) Cover Ratio: Percentage of rental income vs. mortgage payment (target: 125-145%), (2) Net Rental Income: Monthly income after all expenses, (3) Monthly Cashflow: Net income after mortgage payment, (4) Annual Cashflow: Total yearly net income.
⚠️ Interpreting Results: 145%+ (Excellent): Meets all lender requirements, qualifies for best rates. 125-145% (Good): Meets most lender requirements, may face stricter criteria from some lenders. Below 125% (Poor): Unlikely to qualify for BTL mortgage, consider larger deposit, lower-priced property, or higher-rent area. Remember: Lenders test at stressed rates (5.5-6.5%), so your actual cashflow will be better if you secure a lower rate.
Important Buy-to-Let Investment Reminders
- Lender Requirements: Most lenders require 125% ICR minimum (145% for higher LTV or portfolio landlords), calculated at stressed rates (5.5-6.5%), using 80% of market rent.
- Tax Implications: Rental income taxed at your marginal rate (20-45%). Section 24 restricts mortgage interest relief to 20% tax credit. Capital gains tax (18-28%) on property sales. Consult tax advisors.
- Deposit Requirements: BTL mortgages typically require 25% deposit minimum (75% LTV). Better rates available at 60-65% LTV (35-40% deposit). Use our Deposit Calculator.
- Additional Costs: Stamp duty (3% surcharge on BTL), legal fees (£1,000-2,000), survey (£400-1,000), mortgage arrangement fee (£0-2,000), refurbishment costs.
- Professional Advice: This calculator provides estimates only. Consult FCA-regulated mortgage advisors for personalized BTL mortgage advice and tax professionals for landlord tax planning.
FCA Compliance Notice
This calculator provides rental cover ratio estimates for informational purposes only. It does not constitute financial, investment, or mortgage advice. Buy-to-let mortgage lending is regulated by the FCA and subject to strict affordability criteria. Rental cover ratio requirements (typically 125-145%) vary by lender and are calculated at stressed interest rates (usually 5.5-6.5%). Actual mortgage approval depends on individual circumstances, property type, location, and lender criteria. Tax implications for landlords including income tax on rental profits and capital gains tax on property sales should be considered. Always consult FCA-regulated mortgage advisors and tax professionals before making property investment decisions. MortgagePro.uk is a comparison tool and not a financial advisor or mortgage lender.
Understanding Rental Cover Ratio
What is Rental Cover Ratio?
- Measures rental income against mortgage payments
- Key metric for buy-to-let viability assessment
- Lenders typically require 125-145% coverage
- Higher ratios indicate better investment security
- Essential for stress testing investments
Calculation Method
- Basic formula: (Monthly Rent ÷ Mortgage Payment) × 100
- Stress test at higher interest rates
- Include void periods and maintenance costs
- Factor in property management fees
- Consider insurance and other expenses
Lender Requirements
- Most lenders require 125% minimum coverage
- Some require 145% for higher LTV mortgages
- Calculated at stressed interest rates
- Portfolio landlords face stricter criteria
- Limited company purchases may differ
Optimization Tips
- Choose properties in high-demand areas
- Optimize rental income through improvements
- Minimize void periods with good management
- Shop around for competitive mortgage rates
- Consider longer-term fixed rates for stability
Frequently Asked Questions
Essential information about rental cover ratios and property investment analysis
What is a good rental cover ratio for property investment?
A good rental cover ratio is typically 125% or higher, meaning rental income should be at least 25% more than the mortgage payment. Many lenders require 125-145% coverage, calculated at stressed interest rates. Higher ratios provide better security and cash flow for investors.
How do lenders calculate rental cover ratio for mortgage applications?
Lenders typically calculate rental cover ratio using expected rental income (often 80% of market rent to account for voids) divided by the mortgage payment at a stressed interest rate (usually 2-3% above the actual rate). They may also factor in management fees and other costs.
What expenses should I include when calculating rental cover ratio?
Include property management fees (10-15% of rent), insurance, maintenance reserves, void periods (typically 5-10% allowance), ground rent, service charges if applicable, and any professional fees. Some investors also factor in minor repairs and regular maintenance costs.
Can I improve my rental cover ratio if it's too low?
Yes, you can improve rental cover ratio by: increasing rental income through property improvements or better marketing, negotiating lower mortgage rates, increasing your deposit to reduce monthly payments, choosing properties in high-demand rental areas, or improving property management to reduce void periods.
How does rental cover ratio differ from rental yield?
Rental cover ratio specifically measures if rental income covers mortgage payments (income vs. debt service), while rental yield measures return on investment (annual rent vs. property value). Cover ratio is crucial for cash flow and mortgage qualification, while yield measures overall investment performance.