I want to remortgage my BTL to release £80k for a new deposit. What LTV am I likely to get from mainstream lenders now, given rising rates, and will they factor in my current property's rental income for affordability?
Quick Answer
Mainstream lenders typically offer up to 75% LTV on BTL remortgages. They will assess affordability using a rental stress test, meaning your property's rental income must cover 125% of the mortgage payment at a notional interest rate, often around 5.5%. Your personal income isn't usually a primary factor unless the rental coverage is borderline.
## Remortgaging Your Buy-to-Let to Release Capital
Remortgaging a buy-to-let (BTL) property to release equity for a new deposit is a common strategy for portfolio growth. However, with the current economic climate, particularly rising interest rates and stricter lending criteria, understanding the landscape is crucial. You're looking to release £80,000, and this involves two main considerations: loan-to-value (LTV) and affordability.
### Loan-to-Value (LTV) for BTL Remortgages
For BTL remortgages, especially when releasing capital, mainstream lenders are generally cautious. You're typically looking at a maximum LTV of 75%. Some might stretch to 80% if your existing equity is substantial and your rental income is very strong, but 75% is a more realistic and widely available figure. This means if you need to release £80,000, and you're aiming for a 75% LTV, your property would need to be valued at approximately £320,000, and your outstanding mortgage balance would need to be below £240,000 after the remortgage.
For example, if your property is valued at £400,000, a 75% LTV would allow a mortgage of up to £300,000. If your current mortgage is £180,000, you could release £120,000.
### Affordability and the Rental Stress Test
This is where BTL mortgages differ significantly from residential mortgages. Lenders primarily assess the affordability of a BTL mortgage based on the property's rental income, not your personal earned income. They use what's known as a 'rental stress test' or Interest Cover Ratio (ICR).
The standard BTL stress test requires the rental income to cover 125% of the mortgage payment. This payment is calculated not at the actual pay rate you'd receive, but at a 'notional' or 'stressed' interest rate, which is currently often around 5.5%. Some lenders might use 6% or even higher, especially for longer fixed terms or higher LTV products. The Bank of England base rate is 4.75% as of December 2025, but BTL lenders build in a buffer.
Let's break this down:
* **Calculate potential new mortgage amount:** Based on your required £80,000 release and existing mortgage balance, determine the total mortgage you'd need.
* **Apply the stress rate:** Multiply the new mortgage amount by the notional interest rate (e.g., 5.5%).
* **Factor in the ICR:** Multiply that interest payment by 125% (or sometimes 145% for higher rate taxpayers, though this varies by lender and product).
* **Compare to actual rent:** The resulting figure is the minimum annual rental income your property must generate to pass the affordability test.
For instance, if you're looking for a new mortgage of £250,000, and the lender uses a 5.5% notional rate and a 125% ICR:
£250,000 x 0.055 = £13,750 (annual interest)
£13,750 x 1.25 = £17,187.50 (required annual rental income)
This means your property would need to achieve at least £1,432.29 per month in rent.
### Personal Income and Top-Slicing
While rental income is paramount, your personal income might come into play if the property's rent just falls short of the stress test. Some lenders offer 'top-slicing', where they allow you to use a portion of your personal income (after living expenses) to bridge a small gap in the rental coverage. However, this isn't a universal offering and usually applies when the rental shortfall is minor.
### Impact of the Additional Dwelling Surcharge
It's important to remember that when you acquire your *next* property, you'll be subject to the additional dwelling surcharge for Stamp Duty Land Tax (SDLT), which stands at 5% as of April 2025. This needs to be factored into your total purchase costs for the new property.
Steven's Take
Listen, remortgaging to pull out deposit money is a smart move, one I've used myself to turbocharge growth. But you've got to be clinical about the numbers. The 75% LTV is pretty standard, sometimes a bit less if you're dealing with specific property types like HMOs or certain flats. The biggest hurdle, in my experience, is always that rental stress test. Lenders are really tightening up there, and that 125% coverage at a 5.5% notional rate, sometimes higher, can really squeeze you. Don't just rely on your agent's rental estimate; get a solid, evidence-based valuation. If your rent isn't quite hitting the mark, explore smaller lenders or specialists; they sometimes have slightly different criteria, but it's not a given. And critically, make sure the numbers stack up for the *new* property, factoring in that 5% SDLT surcharge; that's a chunky cost you can't ignore.
What You Can Do Next
**Get an accurate property valuation:** Contact a local estate agent or surveyor to get a realistic, up-to-date valuation of your BTL property. This is crucial for determining how much equity you can access.
**Calculate target mortgage amount:** Based on your property's value and a realistic LTV (e.g., 75%), work out the maximum mortgage you could secure. Subtract your current mortgage balance to see the maximum capital release.
**Verify current rental income:** Have clear evidence of your current actual rental income. Consider if there's scope to increase this, even slightly, as it directly impacts affordability.
**Perform a preliminary stress test:** Use the standard 125% ICR at a 5.5% notional rate to calculate the minimum rent required for your target mortgage amount. See if your actual rent meets or exceeds this.
**Shop around with BTL mortgage brokers:** Specialist BTL brokers have access to a wider range of lenders and can help you find products that fit your specific circumstances, including options for capital raising and top-slicing if needed.
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