Testing rent against interest
Buy-to-let lenders often require expected rent to cover a percentage of mortgage interest calculated at a specified stress rate. This is commonly called the interest coverage ratio test.
Why results vary
Stress rates and coverage ratios vary with tax status, product type, fixed-rate period and lender policy. The property valuation also needs to support the expected market rent.
Affordability is broader than one test
Some lenders assess personal income as well. Landlords should separately budget for voids, maintenance, insurance, tax and regulatory obligations.