How much can I borrow?
Estimate the indicative maximum loan your rent will service on an interest cover basis, with the implied loan to value.
Your estimate
Illustrative only. Not a quote or advice. Not an offer of finance.
How the borrowing calculator works
On an investment property, lenders size the loan from the rent, not just the price. They apply an interest cover ratio, also called DSCR, so the rent comfortably covers the loan interest. We take your annual rent and divide by the interest cover ratio to find the maximum annual interest the rent can service. We then divide that by the interest rate to find the indicative maximum loan.
The formula is maximum annual interest equals annual rent divided by interest cover ratio over one hundred. Maximum loan equals maximum annual interest divided by the rate over one hundred. If you enter a price, the implied loan to value equals the maximum loan divided by the price multiplied by one hundred.
Why interest cover, or ICR, drives the loan
Lenders want headroom so a let warehouse can still pay its mortgage through a rent review, a void or a rate rise. They usually set interest cover ratios between 125 and 145 percent, and price the loan accordingly. A higher ratio means a stronger cushion but a smaller loan. Where the rent is thin against the price, interest cover becomes the binding cap and the loan lands below the headline loan to value. To model the deposit and monthly cost once you have a loan figure, use our commercial mortgage calculator.
Worked example
On a warehouse let at 90,000 pounds a year, at a 7.5 percent rate and a 130 percent interest cover ratio, the maximum annual interest is about 69,200 pounds and the indicative maximum loan is roughly 923,000 pounds. Enter a 1.3 million pound price and the implied loan to value is around 71 percent, comfortably within the usual range. Send us the deal for a real view.
How much can I borrow: common questions
How do lenders decide how much I can borrow on a commercial property?
On an investment, the main test is interest cover. The lender wants the rent to cover the loan interest by a comfortable margin, typically 125 to 145 percent, and caps the loan at the level the rent will service. The price and loan to value then act as a second cap. Enter your rent, rate and interest cover ratio to see the indicative maximum loan.
What is an interest cover ratio or DSCR?
Interest cover ratio, sometimes shown as DSCR, is the rent divided by the loan interest. A 130 percent ratio means the rent is 1.3 times the interest, leaving a 30 percent cushion. Lenders use this to make sure a let warehouse can still pay its mortgage if rates rise or a void appears. Higher cover means a lower maximum loan.
Why is my borrowing capped below the loan to value figure?
Because rent has to service the debt. On a keenly priced investment with a modest yield, the rent may only support a loan below the headline loan to value, so interest cover becomes the binding constraint. Enter a price in the calculator and we will show the implied loan to value alongside the rent based maximum.
Want to know what you can really borrow?
Send us the warehouse and the rent and we will come back with a view on the loan and likely terms within one working day.