What is Mortgage Rental Cover?

Rental cover is a restriction that's now used on all buy-to-let mortgages to limit the loan amount based on the rental income.

The idea is to ensure there's at least a little "spare" in the rent, above and beyond the mortgage payment (or more likely a "stress rate" mortgage payment).

To pass a rental cover check, the monthly rent must be at least a certain multiple of the monthly mortgage payment (using a standard interest rate).

The interest rate used varies between lenders, mortgage products and the applicants situation (eg a "portfolio landlord" will typically face a tougher test).

The require multiple is normally expressed as a percentage (over 100%) and also varies on all the same factors.

Rental cover restrictions are always calculated for individual properties but they are normally also calculated at a portfolio level for landlords with multiple properties.

How do you calculate mortgage rental cover?

There are a few different rental cover calculations you might want to do, below is a single summary and example. You can find complete details on mortgage rental cover calculations, including Excel formulas here.

To workout what the rental cover is for a given rent and mortgage, the formula is:

([monthly rent] / ( ([mortgage] * ([stress rate] / 100) ) / 12) ) * 100 = [rental cover]

For example, using:

  • Mortgage: £120,000
  • Stress rate: 5%
  • Monthly rent: £800

Means...

(800 / ( (120000 * (5 / 100) ) / 12) ) * 100
= (800 / ( (120000 * 0.05) / 12) ) * 100
= (800 / (6000 / 12) ) * 100
= (800 / 500) * 100
= 1.6 * 100
= 160%

Ie a rental cover of 160%. If that's higher than your mortgage requirement (typically around 150%) then you would satisfy the mortgage rental cover requirement.

You can use the free PaTMa buy-to-let profit calculator to do this calculation for you.