Buy to Let

Buy to let is the UK term for purchasing property to rent out, and for the mortgages that finance it. UK buy to let lenders underwrite on rental coverage much like DSCR lenders, requiring rent to exceed a stressed interest payment by 125 to 145%.

The UK test is an interest coverage ratio: expected rent divided by the mortgage interest at a stressed rate set by regulators, with minimums of 125% for basic-rate taxpayers and often 145% for higher-rate taxpayers. It uses interest only, not the full payment, and applies a stress rate above the actual one.

The US DSCR loan is the closest analogue. Both qualify the property on its rent rather than the borrower on income, both are made to investors only, and both are priced above owner-occupied loans. The differences are in the denominator: PITIA at the actual rate in the US, stressed interest alone in the UK.

Further reading: Buy to Let on Wikipedia.