Mortgage Calculators
Rental Yield Calculator
Yield tells you whether the property works as an investment. The interest cover ratio tells you whether a lender will fund it. They are not the same test.
- Gross and net rental yield
- Whether the rent passes the stress test
- The maximum loan the rent supports
- How ICR differs by tax status
broad range of UK lenders
Momentum Financial Services Ltd · FRN 1011740
a real adviser, start to finish
rates, fees & total borrowing
Buy-to-let lending is sized by the rent, not your salary, so a strong yield can still fail a lender stress test. Most buy-to-let mortgages are not regulated by the Financial Conduct Authority. This is an estimate based on typical lender criteria and current rates. It is not advice, a recommendation, or an offer of credit. What you can actually borrow depends on your circumstances and the lender's own assessment.
Interest cover ratios and stress rates vary by lender, product and tax position. The figures used here reflect common market practice rather than any single lender. Correct as at 15 August 2026; criteria change without notice.
Yield and ICR are answering different questions
Gross yield is the annual rent as a percentage of the purchase price, and it is useful for comparing properties quickly. Net yield takes off the running costs — letting fees, insurance, maintenance, ground rent and service charges, void periods — and is the number that tells you what the investment actually returns.
Interest cover ratio is a different test entirely, and it is the lender’s. They take the loan, apply a stress rate that is usually well above the rate you will actually pay, and require the rent to cover that stressed interest by a margin, commonly 125% to 145%. A property can be a perfectly good investment on yield and still fail ICR.
The percentage required varies with your tax position. Basic rate taxpayers are commonly assessed at 125%, higher rate taxpayers at 145%, and limited company borrowing often at 125%, which is one of several reasons portfolio landlords use company structures.
Gross yield, net yield and the gap between them
A £180,000 property let at £950 a month produces £11,400 a year, a gross yield of 6.33%. That is the number quoted in every listing, and it is not the number that reaches your bank account. Take off a 10% letting agent fee (£1,140), landlord insurance (£300), an allowance for maintenance and voids at 10% (£1,140), gas safety and other compliance (£150), and the income is closer to £8,670. On the same purchase price that is a net yield of about 4.8%, before any mortgage interest and before tax.
Then apply the mortgage. On a £135,000 interest-only buy-to-let loan at 5.25%, interest is roughly £7,090 a year. The £8,670 becomes about £1,580 of pre-tax cash flow. That is a real return on the £45,000 deposit, but it is a long way from 6.33%, and it is why yield alone is a poor basis for a purchase decision.
The interest cost is also no longer deductible from rental income for individual landlords in the way it once was; relief is given as a basic-rate tax reduction instead. For a higher-rate taxpayer holding property personally, that materially changes the after-tax picture and is one of the main reasons limited company structures became common.
Why the stress test usually bites before the yield does
Buy-to-let lending is sized by the rent, not by your salary. The lender takes the monthly rent, applies an interest coverage ratio, and stresses the loan at a notional rate that is usually well above the rate you will actually pay. Typical coverage requirements sit around 125% for basic-rate taxpayers and 145% for higher-rate taxpayers, with stress rates commonly in the 5.5% to 7% region depending on the product and the fix length.
The practical effect is that a property can look like a strong yield and still not support the loan you want. £950 a month at 145% coverage and a 6.5% stress rate supports roughly £121,000, not the £135,000 in the example above. Longer fixed rates often allow a lower stress rate, which is why five year fixes frequently permit larger buy-to-let loans than two year fixes on the same property.
Coverage ratios, stress rates and tax treatment all change, and they vary by lender and by borrower type. Treat any figure here as illustrative and check the current position before committing to a purchase.
Where to go next
Independent sources
- GOV.UK: tax when renting out — Income tax and National Insurance for landlords
- GOV.UK: working out rental income — Which expenses you can and cannot deduct
Tell Us About the Property
Send us the price and the expected rent. We will tell you what the rent will support once the lender stress test is applied.
Enquiry Form
Tell us about your situation and we'll get back to you with tailored advice.
Read More For Landlords
Yield is the headline. Tax and finance decide what you actually keep.
Buy to Let Investment Guide
Yields, stress tests and the numbers behind a rental that actually works.
Buy to Let Remortgaging
Refinancing a rental now that rent cover is tighter than it used to be.
Tax on Rental Income
What is taxable, what you can still deduct, and how Section 24 works now.
Limited Company Buy to Let
SPV lending, rates against personal ownership, and the tax trade-off.
Check the numbers with a broker
Yield tells you whether it works as an investment. We will tell you whether a lender will actually fund it.
Frequently Asked Questions – Rental Yield Calculator
What is a good rental yield?
It depends heavily on where you are buying. Five to six per cent gross is a reasonable benchmark in much of the country, with parts of the north and midlands running higher and central London considerably lower. Net yield after costs is the figure that matters for comparison.
What is the difference between gross and net yield?
Gross yield is annual rent divided by the purchase price. Net yield subtracts running costs first, so it reflects what you actually keep. The gap between the two is often larger than landlords expect once voids and maintenance are counted honestly.
What is ICR and why does it matter?
Interest cover ratio is the lender’s test that the rent covers the mortgage interest with a margin, calculated at a stressed rate rather than the rate you pay. If the rent does not meet it, the lender reduces the loan until it does, or declines.
Why is my ICR 145% and not 125%?
It is usually driven by your tax position. Higher and additional rate taxpayers are commonly assessed at 145%, basic rate taxpayers at 125%. Borrowing through a limited company is often assessed at 125% regardless, which is one reason SPV structures are popular.
Can I still get a buy to let with bad credit?
Yes, though the windows are tighter than on residential lending and can run to 72 months for a CCJ with some lenders. The rental figures still have to work; adverse credit narrows which lenders will look, it does not relax the stress test.
Does the rent have to be confirmed by a valuer?
Yes. The lender’s valuer gives a market rent figure and the lender uses that, not the rent an agent has quoted you or what a current tenant pays. If the valuer’s figure comes in low, the maximum loan falls with it.