Buy to Let Mortgage affordability is calculated by ensuring that the rent payable is over the minimum mortgage that will be required to be paid (AND in most cases a minimum personal income requirement.)

Their are three variables to formula mortgage lenders use - the Rent/the Loan, the Multiplier and the Rate.

**the Rent**: is what rent can be achieved at the property. Often this value comes not from the Tenancy Agreement but what a valuer may think you can achieve.

or the Loan: how much you can borrow.

**the Multiplier**: is a percentage of which the Rent of the property must exceed. The bank does not just want the rent to cover the mortgage, with £0 left over. They may want the mortgage plus 20%, therefore 120% multiplier.

**the Rate**: is a interest rate the lender decides to stress test by. Sometimes a rate a lenders risk department decides but more often the lenders Standard Variable Rate (SVR).

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**The Two Buy to Let Affordability Formulas**

You can use the formula in two ways:

**Rent to Max Loan Formula**

Given the Rent you can achieve what is the maximum loan a lender will offer:

theRent (divide) theMultiplier (divide) theRate (multiply) 12 months

**Rent Required for Loan Formula**

Given the Loan you want to borrow, what is the minimum rent a lender will require:

theLoan (divide) 12 months (multiply) theRate (multiply) theMultiplier

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**What MULTIPLIER and RATE do Lenders Use?**

Each lenders risk department decides different rates - depending on there risk profile and how much market share they target for. The multipliers range from 110% to 150% and the Rates range from 5% to 6%

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