Question 1

How is the monthly mortgage payment calculated?

Accepted Answer

For repayment mortgages, we use the standard amortisation formula: M = P × [r(1+r)^n] / [(1+r)^n - 1], where P is the loan amount, r is the monthly interest rate, and n is the total number of payments. For interest-only mortgages, the monthly payment is simply the loan amount multiplied by the monthly interest rate.

Question 2

What is a good LTV ratio for buy-to-let?

Accepted Answer

Most buy-to-let lenders offer products up to 75% LTV, meaning you need at least a 25% deposit. Some specialist lenders go up to 80-85% LTV, but rates are typically higher. Lower LTV ratios generally unlock better interest rates.

Question 3

What is the interest coverage ratio (ICR)?

Accepted Answer

The ICR measures how comfortably your rental income covers mortgage payments. Most buy-to-let lenders require an ICR of at least 125% (1.25x) — meaning monthly rent must be at least 125% of the monthly mortgage payment. Some lenders require 145% for higher-rate taxpayers.

Question 4

Should I choose repayment or interest-only?

Accepted Answer

Interest-only mortgages have lower monthly payments, improving cash flow for landlords. However, you must repay the full loan at the end of the term. Repayment mortgages cost more monthly but build equity over time. Many landlords choose interest-only for cash flow and rely on property appreciation for the exit strategy.

Question 5

What is a good rental yield for UK buy-to-let?

Accepted Answer

A gross yield above 5% is generally considered acceptable, with 6-8% being good and above 8% excellent. Net yield (after expenses) is a better measure — aim for at least 3-4% net. Northern cities often offer higher yields but potentially lower capital growth compared to London and the South East.

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