Financing
ICR (Interest Coverage Ratio)
Rental income compared to mortgage interest payments
Full Definition
Interest Coverage Ratio compares rental income to mortgage interest costs. Lenders typically require rental income to be 125-145% of mortgage interest at a stress test rate (often 5.5%+). For example, at 145% ICR with 5.5% stress rate, a £200,000 mortgage would require £1,318/month rent. Higher rate taxpayers may need 165% ICR.
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Analyse a PropertyMore Financing Terms
LTV (Loan to Value)
Mortgage amount as percentage of property value
Bridging Loan
Short-term finance for quick purchases or refurbishment
Remortgage
Replacing existing mortgage with new one
Equity
Property value minus outstanding mortgage
Leverage
Using borrowed money to amplify returns
Portfolio Landlord
Landlord with 4+ mortgaged properties