Rental Income vs Mortgage Cost Calculator

A rental only generates positive cashflow when rent covers the mortgage plus running costs. For example, 1,500 rent minus 900 mortgage minus 300 running costs (letting or management fees, maintenance, insurance) leaves a 300 monthly surplus. A negative figure means the shortfall is funded from other income, and any overall return then depends on capital appreciation rather than monthly cashflow.

How the figure is built

The mechanism runs in one direction: rent comes in, the mortgage payment and running costs go out, and whatever remains is the month's position. When the remainder is positive the property pays its own way; when it is negative the owner tops up the difference from other income. The annual row multiplies the monthly position by twelve, and the after-vacancy row shows the same position after setting aside 5% of the rent for empty periods.

What moves the number most

All three inputs carry equal weight in the formula: it is a plain subtraction, so a one-unit change in rent, mortgage, or costs moves the cashflow by exactly one unit. The inputs differ only in size: rent is usually the largest figure, so a proportional change to rent shifts the result more than the same percentage change to the mortgage or costs, in exact proportion to their sizes.

The formula behind this

This is a simple monthly cashflow calculation: rent minus mortgage minus costs. The primary result assumes full occupancy and does not model vacancy. A separate secondary line applies a flat 5% reduction to gross rent as a rough allowance for empty periods; that line, not the headline, is where vacancy enters. Everything the calculator does is shown in the formula box below, so the arithmetic can be checked against a spreadsheet.

Reading the secondary figures

Alongside the monthly surplus or shortfall, the tool shows the annual surplus or shortfall before vacancy, the rent-to-mortgage ratio (rent measured against the mortgage payment only, before running costs), the surplus or shortfall after a 5% vacancy allowance, and total monthly outgoings. The rent-to-mortgage ratio can read above 100% while monthly cashflow is still negative, because that ratio excludes running costs. The surplus figure is the one that nets everything out. Where the mortgage payment is zero (a mortgage-free rental), the ratio row is omitted, since there is no payment to measure against.

What this doesn't capture

The figure is pre-tax cashflow throughout. It excludes income tax on rent, one-off transaction costs, maintenance emergencies, and capital appreciation. It also treats the mortgage payment as a fixed monthly figure, so it does not model how that payment would change if the interest rate reset. The Buy-to-Let Calculator extends the picture to total return including appreciation, and the Mortgage Calculator shows how the monthly payment itself is derived.