Lenders are looking for clients with long commercial leases, FRI and 3 or 5 year rent reviews, and if possible a recognised tenant with good financial strength.
Provided that the rental income services the mortgage interest by an acceptable margin, the clients own trading position is not irrelevant, but far less important, as lenders want to see that any investment property is self financing.
The margins by which lenders calculate affordability have certainly got wider as lenders tend to use notional rates to calculate coverage rather than the actual BOE base rate because as we are all aware rates will not stay at this level and lenders do not want clients to over extend themselves in this current market, in the certain knowledge that many clients would suffer when BOE rates rise to anything like the previous levels at between 4--5%.
Most investors have tended to go for maximum leverage, which would not be wise in this current low interest rate market.
We can expect most commercial mortgages to be set with a margin around 3---4% above base, and with BOE at 0.5%, its a very good deal. However with BOE at 4% its a very different story, and this be upper most in our minds when we look to see how any loane maybe covered in the future.
LOng term planning and doing our due diligence with the future interest rates in mind is so essential to make sure that we do not run into trouble with a commercial mortgages in a very different interest rate climate, when servicing the debt maybe a little harder.
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