Interest cover ratio, and the rate the rent is tested against. UK lenders use 125% for a basic-rate taxpayer, 145% for higher rate, stressed at the higher of product + 2% and 5.5%.
The revert rate is a guess — nobody knows what they will be offered in five years. A single assumed number gives one confident-looking payment and hides how much it moves. The dashed line is what you pay during the fix; the gap up to the curve is the step.
| Period | Payment | Principal | Interest | Balance |
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A schedule that pays the loan to zero by a fixed date. Each payment splits between interest and principal, and the split shifts: early payments are mostly interest, later ones mostly principal.
Principal is the debt being repaid; interest is the cost of borrowing: balance × monthly rate. The high early balance is why the first payments are mostly interest.
Loan-to-value = loan ÷ price. Above about 80% lenders usually require mortgage insurance; this tool estimates it and drops it once paydown takes LTV to 80%.
Extra principal, or 26 half-payments a year, shortens the loan and cuts total interest. Confirm with your servicer how extras and biweekly drafts are applied.
Almost every rule of thumb is written for one market and quietly assumes it. “Always overpay” is right in the US, where it is free, and can cost you in the UK or France above a yearly allowance. “Lock in a 30-year fixed” is not an option in most of Europe, where you fix for two to five years. “Put 20% down to avoid insurance” is US PMI, which stops at 80%; Canadian and Australian premiums are added to the loan up front. Switch the market selector and watch which assumptions survive.
Lenders test the rent against interest at a stress rate (typically the higher of your rate plus 2% and 5.5%) and want it to cover that interest by 125% for a basic-rate taxpayer or 145% for higher rate. The advertised 25% deposit is not the real requirement; the rent is.
You repay nothing, so the balance at the end is the balance at the start. The payment is lower because you are renting the money, and the total interest is higher because the balance never falls. Lenders want a credible plan for the capital: a sale, an investment, or a remortgage. Switch the toggle off to see the same loan repaid.
An additional property pays the normal stamp duty bands plus 5% of the whole price, from the first pound. On a £400,000 purchase that is £20,000 on top, and unlike a deposit none of it comes back.
Gross yield is rent over price and ignores every cost. Net yield takes off running costs. Neither counts the mortgage. Cash-on-cash, what is left after costs and interest over the cash you actually put in, answers whether the money was worth committing. At current rates a respectable-looking yield can land near zero.
Since 2020 an individual UK landlord cannot deduct mortgage interest from rental income and receives a 20% tax credit instead, so a higher-rate taxpayer pays tax on rent that has already gone to the lender. Every figure here is before tax; expect the after-tax position to be materially worse.
Because a buy-to-let is underwritten on the rent, not on your salary. The lender divides the annual rent by the interest cover ratio (125% for a basic-rate taxpayer, 145% for higher rate) times a stress rate (usually the higher of your rate plus 2% and 5.5%). That is the largest loan the rent will service, and it is very often smaller than the loan a 25% deposit implies.
It is the norm, because the payment is lower and the interest is a cost against rental income. The catch is that nothing is repaid: the full balance falls due at the end and you need a plan for it. Switch the toggle off to see the same loan as a repayment mortgage — the monthly cost rises sharply and the total falls.
Usually not. Most buy-to-let lending sits outside Financial Conduct Authority regulation, so the consumer protections attached to a regulated residential mortgage may not apply. The exception is a “consumer buy-to-let”, broadly where you did not set out to be a landlord — an inherited property, for instance.
No. They are representative market values for orientation, so the page starts you somewhere sensible rather than at zero, and every one is editable. They are not quotes, not sourced from any lender, and they go out of date. Use your own figures, or a broker’s, before deciding anything.
Interest is charged on the remaining balance, which is highest at the start. As the balance shrinks, the interest portion of each fixed payment shrinks with it and more goes to principal.
Private mortgage insurance is typically required when you put down less than 20% (LTV above 80%). Many lenders drop it once LTV reaches 80% through paydown — this tool estimates monthly PMI at your chosen rate and stops charging it once cumulative principal brings LTV to 80% of the original price.
Yes — every dollar down is a dollar you don't finance, plus all the interest it would have accrued. Crossing 20% down often removes PMI entirely, which is a step-change in monthly cost.
Closing costs (beyond rough awareness), HOA special assessments, rate adjustments (ARMs), refinancing, discount points, and tax deductibility of mortgage interest. Your lender's figure is the one to trust.
A 15-year loan pays far less total interest, but the monthly payment is higher. The “right” term depends on cash flow and opportunity cost — use the compare cards above for your numbers.
Releases in which this page changed, newest last. Derived from the archived copy of every release, not from notes written afterwards — so it reflects what actually shipped. Site-wide passes are left out; they are in the full changelog.