Navigating Commercial Mortgages for Investment Properties

Investing in commercial properties can be a lucrative endeavor, but securing the right mortgage is a nuanced process. In this discussion, we’ll delve into the intricacies of commercial investment property mortgages, focusing on the pivotal factor of affordability and the diverse considerations that can influence your borrowing experience.

Unveiling Affordability Dynamics

When entering the realm of commercial mortgages, aspiring property investors often express a desire for the maximum loan amount at the most favorable rates. Achieving this goal, however, hinges significantly on the concept of affordability, a multifaceted metric that lenders carefully scrutinize.

The Interplay of Factors

Loan-to-Value (LTV) and Property Type

Determining the maximal Loan-to-Value (LTV) ratio is a common goal, but it’s crucial to recognize that different lenders have varying preferences, especially concerning property types. Some lenders may favor certain property classifications over others, influencing the available loan amount.

Lease Length and Geographic Considerations

The duration of a lease holds significance in the eyes of lenders. Longer leases are generally viewed favorably, particularly for loans with fixed terms. Additionally, the geographic location of the property matters, not just in terms of the region but also its specific position within a town or city.

Loan Amount and Lender Selection

The desired loan amount can impact lender choices. Some lenders set minimum thresholds, and smaller loan amounts may limit options. Additionally, distinguishing between High Street lenders and specialist lenders is crucial, as each caters to different scenarios.

Beyond the Basics

In addition to the fundamental considerations mentioned above, other factors play a pivotal role in shaping the borrowing landscape.

• Tenant Information: Understanding the nature and stability of the tenant’s business is paramount. Lenders may scrutinize new businesses, potentially impacting loan terms.
• Income Types: Diversifying income sources, such as radio masts or unique revenue streams, requires careful consideration. Different lenders may have varying policies regarding these income types.
• Opco Propco Structure: Ownership structures, such as Opco Propco arrangements, can influence lender preferences. Some lenders handle these structures more favorably than others.
• Lender’s Policy: Lenders’ policies regarding rental income deductions and restrictions on certain income types contribute to the overall affordability equation.

Affordability in Action

Affordability analysis involves a comprehensive examination of various factors, each playing a pivotal role in shaping the loan’s terms.

Interest Rate Impact

The interest rate offered by a lender significantly influences affordability. Lower rates enhance the feasibility of securing a larger loan amount at more favorable terms.

Stress Rate Considerations

Lenders apply a stress rate to assess the loan’s affordability under different scenarios. This stress rate, often higher than the offered rate, is a safeguard against potential interest rate increases.

Loan Type Dynamics

The choice between interest-only and capital repayment loans further impacts monthly payments. Understanding how lenders calculate affordability based on loan structure is essential.

Deductions and Restrictions

Some lenders deduct costs from rental income, impacting the net usable rent used in affordability calculations. Restrictions on certain income types may further influence the overall assessment.

Realizing Loan Potential: Examples and Scenarios

Illustrating the impact of stress rates, debt service coverage, and interest rates through examples provides a tangible understanding of how these variables influence the loan amount attainable.

Stress Rates and Debt Service Coverage

Comparing High Street lenders, with higher stress rates, to specialist lenders, with lower stress rates, reveals the potential for securing a higher loan amount with favorable terms.

Interest Rates and Loan Amounts

Exploring how lower interest rates from certain lenders can result in more affordable loans, ultimately influencing the maximum loan amount achievable.

Tips for Strategic Preparation

Navigating the complexities of commercial mortgages requires strategic preparation. Consider the following tips to enhance your ability to secure an optimal loan:

1. Lease and Tenant Management: Ensure leases align with lender preferences and aim for tenants with established businesses.
2. Documentation: Have up-to-date Energy Performance Certificates (EPCs) and planning permissions in place.
3. Property Type Selection: Consider semi-commercial properties for potentially better rates, and align property choices with lender requirements.
4. Loan Purpose Clarity: Clearly define the purpose of the loan, ensuring it aligns with the lender’s expectations.
5. Plausibility Test: Ensure external income covers living expenses to pass the lender’s plausibility test.

Conclusion

In conclusion, the journey towards securing a commercial mortgage for investment properties involves a delicate dance of factors, where affordability takes center stage. By understanding the intricate interplay of variables and adopting a strategic approach, investors can position themselves to navigate the lending landscape with confidence.

Understanding Commercial Investment Properties and Mortgages: A Comprehensive Guide

Introduction

Embarking on the journey of commercial investment properties requires a profound understanding of the intricate dynamics surrounding mortgages. In this comprehensive guide, we delve into the complexities of raising mortgages, specifically focusing on the critical aspect of affordability. Our exploration extends to the various factors that shape affordability, shedding light on how different lenders approach this vital consideration. As interest rates experience an upward trajectory, the significance of comprehending affordability becomes increasingly pronounced. This discussion navigates through key elements, offering insights into Loan-to-Value (LTV), property types, lease length, location, loan amount, and the crucial distinctions between High Street and specialist lenders.

Key Factors in Commercial Investment Properties

1. Loan-to-Value (LTV)

Determining the maximum LTV stands as a pivotal consideration. However, the type of property may influence lender preferences, leading to variations in achievable LTV.

2. Lease Length

The length of a lease emerges as a significant factor, impacting the property’s desirability to lenders. An ideal lease duration, aligned with the loan term, enhances the property’s appeal.

3. Location

The geographic location of the property, both regionally and within a specific town, carries substantial weight. Lenders often have varied criteria based on these factors, influencing loan terms accordingly.

4. Loan Amount

The desired loan amount plays a crucial role in determining lender options. Minimum thresholds and lender preferences may vary, influencing the selection between High Street and specialist lenders.

5. Tenant Details

Understanding the tenant’s business, its establishment duration, and the type of income it generates are vital considerations. Lender assessments of tenant stability directly impact the terms offered.

6. Property Type

Different lenders exhibit preferences or restrictions concerning property types. Some may be averse to semi-commercial properties, while others specialize in this category.

7. Income Type

The nature of income generated by the property holds significant importance. Lenders may be selective about the types of income they consider, such as income from specific businesses or unique sources.

8. Opco Propco Structure

Properties structured under Opco Propco arrangements may influence lender preferences. Understanding how lenders handle this structure is crucial for selecting the most suitable financing option.

9. Lender’s Policy

Each lender follows a distinct policy regarding rental income. Understanding how a lender calculates net usable rent, considering deductions for specific elements, is crucial in gauging affordability.

10. Stress Rate and Debt Service Coverage

Lenders apply stress rates to account for potential interest rate increases. Additionally, the Debt Service Coverage Ratio (DSCR) influences the loan amount, with High Street lenders typically imposing higher DSCR requirements than specialist lenders.

11. Interest-only vs. Capital Repayment

The loan structure, whether interest-only or capital repayment, affects affordability. While interest-only payments may be lower, lenders often assess affordability based on a capital repayment basis, preparing for worst-case scenarios.

Affordability Calculation and Examples

1. Interest Rate Impact

The interest rate offered significantly influences affordability. Lower interest rates make loans more affordable, enabling borrowers to qualify for higher amounts. For example:

• Lender A at 5.5% offers a loan amount of £300,000.
• Lender B at 7.5% offers a loan amount of £200,000.

2. Stress Rate and DSCR Variations

Comparing stress rates and Debt Service Coverage Ratios among lenders showcases potential differences in the loan amounts they are willing to offer. Specialist lenders, with lower stress rates and DSCR requirements, may provide higher loan amounts than High Street lenders. For example:

• High Street lender with 8.5% stress rate and 175 DSCR offers £300,000.
• Specialist lender with 5.6% stress rate and 125 DSCR offers £525,000.

3. Examples of Loan Amount Variations

Illustrative examples demonstrate the impact of stress rates and DSCR on achievable loan amounts. High Street lenders, with higher stress rates and DSCR, may offer significantly lower loan amounts compared to specialist lenders with more favorable terms. For example:

• High Street lender: £300,000 loan with 8.5% stress rate and 175 DSCR.
• Specialist lender: £525,000 loan with 5.6% stress rate and 125 DSCR.

Tips for Maximizing Loan Potential

1. Tenant Leases and Planning

Ensuring tenant leases align with lender preferences and having necessary documents like EPCs in place enhances loan approval chances. Checking property planning permissions is vital to avoid complications during legal processes.

2. Deposit and Additional Costs

Considering the deposit requirements, stamp duty, and legal fees is essential for adequate financial preparation. Evaluating external income sources and managing living costs independently of rental income strengthens loan applications.

3. Purpose of the Loan

Clearly defining the purpose of the loan, especially for investment properties, helps in selecting lenders and securing favorable terms. Some lenders may inquire about the specific use of funds, and having a well-defined purpose strengthens the application.

Conclusion

In the dynamic landscape of commercial investment properties and mortgages, meticulous preparation is key. Understanding the intricacies of lender criteria, stress rates, and debt service coverage empowers borrowers to navigate the lending process strategically. By aligning property features, leases, and financial considerations, individuals can maximize loan potential and secure favorable terms in an evolving market.

In conclusion, this comprehensive guide aims to equip you with the knowledge needed to approach commercial investment properties and mortgages with confidence. Remember, preparation is the cornerstone of success in the realm of commercial real estate financing. Explore the numerical examples provided to grasp the tangible impact of various factors on loan amounts, enabling you to make informed decisions and secure optimal financing for your commercial investment endeavors.

Today I’m talking about commercial investment properties raising mortgages but specifically if you have an investment property I’m talking about affordability and how different lenders look at affordability and the impact that can make to you very often people come to us and they’ll say look I want the maximum amount I can get at the cheapest rate and and getting that maximum amount and that cheapest rate is going to depend partly on affordability as well as a number of factors so it’s important that we get that right and if I tell you what you need to do to get it right you might that might help you I guess prepare so yeah with rates rising at the moment affordability is becoming more of a factor so I’ll come on to that in a moment but the key things outside affordability ah right LTV if you want the maximal TV but what’s the property type that can affect some lenders don’t like certain property types what’s the length of the lease if you’re looking to get the best terms the longer the least the better within reason as long as it’s not so long and with no breaks that actually that devalues it because they can never get vacant possession so but the length of the lease you know ideally if you’re going for a loan which has got a five-year term on it or a five-year fixed term the lender is going to be thinking well if the lease at least covers for those five years that’s ideal so that opens the opens the door to certain lenders and if you if if you didn’t have a lease for if you only had a lease for a year some lenders that’s not long enough for us so length of the least important location where is it located not only which part of the country but where is it within a certain town the loan amount has an effect as well because there are some lenders who don’t start until 250 000 pounds or others that don’t start until 500 000 pounds so if it’s a smaller amount you might find that a certain lens and say well we’re not in the game for that and then we’ve got to then look at whether we’re going to a High Street lender or we’re going to a specialist lender so all of these factors come into play and we have to take that into consideration before we even get into the affordability side of things other things that you might want to think about is who’s the tenant what type of business are they in how long have they been established if it’s a new tenant going in with a new business one of the lenders is going to offer you maybe the best terms is going to look at that and say well we’re a bit nervous about this because you’ve got a lovely building but the tenant hasn’t isn’t established they could go bump at anytime where does that leave us so they might just say not one for us and another factor is the type of income that you have an example of that would be you might have a property which has got a tenant in it but you’ve got a couple of radio masts on the roof and they’re bringing in ten thousand pounds a year each and you’ll think great I can use that well some lenders won’t use it some will so again the type of income another factor to think about is whether or not the property is an opco propco that means you’ve got a business which owns the property and another business that lets it out normally you see opcopropco in a owner occupier scenario somebody owns the business personally and lets it to his own to his own company so that’s a factor as well because some lenders handle up co-propco well some don’t another factor is the lender’s policy some lenders will go on the rental income some will automatically every time say we’re going to knock 10 off for costs because we’re going to assume that you’ve got costs with regards to achieving that rental income some Wilson won’t some will knock off more so for each different lender we’re going to arrive at what’s the net usable rent take into consideration the the parts that they don’t like the rents that they don’t like like the uh likethe um the masts or there might be agarage on the side or there might be acar park we let the carpet say well andwe don’t do car Parks so we’re going toignore that part of the rent but we dobut we will use the rest so get to thenext the net rentable income incomeso we’ve established what rent we’ve gotwe’ve established those lenders thatwill use that rental won’t use that rentwe know who we’ve got to play with we know what the property is we know whereit is uh we’ve got an idea of all thelenders that are available another factor that uh especially if you’re in the buy to let game you might be used to top slicing this is where alender will allow you to use some outside income to support the borrowing with most commercial investment lendersthey don’t do that let’s say the assetmust support itself the property’s gotto be generating enough rent taking intofact into consideration all of thecalculations we do to support the loanthat doesn’t mean there aren’t lendersthat will allow top slicing but they arefew and far between they are going tocost you more so ideally it needs tostack up on the rentum andumand it’s been rent from that particularproperty not from another propertyuh one other thing just to bear in mindis if you’re over renting and what Imean by that is you you’re let’s sayyou’re getting a render 50 000 poundsper annum but the valuer says wellyou’ve struck lucky there we think it’sworth 40 000 pounds per annum chancesare the lender’s going to go on thelower of the passing rent and what thevalue says so if the value says it’sworth 40 That’s the rental income thatyou’re going to use so be aware of thatif you think you’re on to a great deal avalue might not agree with you knock therent down and that’s the figure we’llhave to work on so again that’ssomething to consider in your numbersright so let’s move onso getting right into the affordabilitypart now let’s say you’ve got a rent of50 000 pounds per annum the fact is thatthe lenders are going to consider are asfollows firstly the interest rateif they are A lender that offers you alower interest rate then the loansnaturally going to be more affordablethan if it was a higher interest rateum so we find very often at the momentbecause rates have gone up that peoplesay I want to borrow to 75 of the valueof the property which is you know thatthat’s generally where where you can getto on an investment property not alllenders go that high but that’s whereyou can get to but because of theaffordability and the rent that’s comingfrom that property we can’t get enoughincome to support a loan that bigbecause it’s not affordable so thelender’s interest rate is critical tothat becauseumto give you an example if you’ve got alender at five and a half percent andyou’ve got another lender at seven and ahalf percent thenthat loan is going to cost you moretherefore if it doesn’t Stack Up onaffordability you’ll have to borrow lessto make it Stack Upuh the next factor is the stress ratenowin most cases lenders will have a stressrate which is different to the pay rateso they might say to you we’ll give youa deal at two and a half percent plusbaseand when you watch this video who knowswhat base rates would be but let’s saythat’s uh that’s six percent we’ll giveyou a deal at six percent but we’regoing to make some assumptions here thatrates are going to increase we’re goingto cover our back so whilst you’repaying six percent we’re going to stressit at eight and a half percent so we’regoing to make sure that you can affordthe repayments if it went up to eightand a half percent so they apply astress rate to their calculation that’sthe first thing the second thing thatthey’ll uh that they’ll tend to do isthey’ll apply a debt service coverageratio Now High Street lenders they’re at175 percent to 200 debt service coverageratio and I’ll give you some numbers toexplain that in a moment but the debtservice coverage ratio ishow much if the monthly repayment is athousand pound a monththey and they’ve got a debt servicecoverage ratio of 200 200 they want tosee that you’ve got a rent of 2 000 amonth so they’re put it’s a bufferthey’re building a buffering nownormally you’re looking at forspecialist lenders around about 125 soif you’ve got a thousand pound a monththey’re going to say right you need tohave 1250 pounds a month uh rent tocover the stress payment of a thousandpound a month bear in mind the stresspayment is higher than you’re actuallypaying you might only be paying 750 amonth 750 pound a month stress is up toa thousand debt service coverage we wantto see 1250 and 1250 is on the low sideum if you’re going to High Streetlendersit could easily be 1750 that they wouldwant to see so in your mind you’rethinking hang on I’m getting a rent of750 pound a month and you’re telling meI need 1750 pounds to be able to affordthis loan yeah that’s what they’retelling youfortunately or unfortunately most HighStreet lenders aren’t really in theinvestment game and they’re moreinterested in owner of occupiedbusinessesum but they will do certain certainassets but generally speaking it’s nottheir gameanother factor is whether the loan iscapital and repayment or capital andinterest I.E you’re paying it over a25-year term and reducing the balance bypaying interest each month or interestonly because an interest-only payment onif the rate was the same aninterest-only repayment is going to befar less than the captain repayment loanbecause you’re not paying off theinterest each monthso uma lot of the lenders will offer interestonly but they will work outaffordability on a capital repaymentbasis so again they’re covering worstcase scenariothen as I mentioned earlier we’ve gotdeductions for costs some lenders willsay right if your rent’s 50 Grand we arenot 10 off straight away so we’ll workon 45 others will say no we’ll work onfull on 50.and then what are the elements that theywon’t allow uh again you’ve got mathyou’ve got some um Telephone masts youknow we went we won’t allow thatum we’ve got a short lease no no wewon’t allow that you could have aproperty which has got multiple tenantsin itand uh they’ll and they’ll say wellwe’ll take those we’ll take those we’lltake that income but we won’t take thatone uh I’ve got one lender that doesn’tlike um people are in who are cardealers and they say Well only 20 of therent can come from a business which is acar dealer so if if you’ve got your cardealers using 30 is 30 right so we’llonly take 20 of it that’s another Factorsemi-commercial some lenders look atsemi-commercial and they’ll use both theresidential and the commercial rent somewill say well we’ll do semi-commercialbut we’re only going to rely on theresidential because really we want to doresidentials we’ll just we’ll justaccept the fact that there’s acommercial element to it so asUnderwriters we’ve got to factor allthis into our thought process to workout where we’re going to goso now let’s just talk through now someexamples of some stress rates and debtservice coverageum variations so you can see thedifference it could make so let’s let’stake a 50 000 pound renter let’s saythat’s the net rentum we we won’t worry about the cost thisis just for comparison purposesif we go into a High Street type lenderwhere we’ve got 50 000 pounds worth ofallowable rent taking everything elseinto consideration which I’ve justtalked about and we’re doing 175 debtservice coveragethat means that 50 000 poundsum we’ve only got 28 000 pounds 500to play with that’s because that twentyeight thousand five hundred multiplythat by 175 gets the rent that they willallow uh that that that works for themsoyour stress repayments can’t be morethan two uh than 28 000 pounds that’sabout 2 370 pounds a month okaythey then apply their stressed rate ofeight and a half percent to it over a25-year term as they write as capitalinterest over 25 years we’re going toapply stress rate of 8.5 percentthat’s going to get you to about a 300000 pound loan with your fifty thousand pounds worth of rent with a High Street type lender okay I’m now going to go to the opposite end of the spectrum just to show you the difference we’ve got a specialist lender who will take that 50 000 pounds could be the net figure againthey don’t stress at 175 they’re stressat one two fiveuh sorry uh debt service coverage at 125percentso that means instead of it being 28 000pounds income that they were using theircalculation it’s forty thousand I.E 40000 times 125 gets you to fifty thousandso that’s about 3 300 pounds a monththat’s a thousand pounds more per monthwe’ve got to use to support theborrowing to get you the amount that youwant so obviously there’s a chance we’regoing to get moresecondly they don’t stress at eight anda half if it’s a fixed rate deal theystress at pay rate and at the momentprobably around about 5.6 again wheneveryou watch this video that would havechanged so at 5.6 which is a lower rateand a lower debt service coverageover and they’ll stood at Capitalinterest over a 25-year term instead ofthat being a 300 000 pound loan that’s a525 000 pound loan now that differenceis massive yeah so what we want to betrying to do because it’s a good ratetoo this lenders off in some great rateswe want to get you onto that really low5.6 rateum take advantage of the of the factthat that’s that what what they work onfor their stress rate to take advantageof the fact that they only have a debtservice coverage of 125 ways we canraise you much much more moneyumsoI guess a lot a lot of this uh thereason I’m telling you things is ithelps you think about how you prepareyourself to be able to qualify for thatloan rather than another loan forexamplewe might uh there might be a lenderwhere it the type of property doesn’ttick their box or the length of theleases doesn’t tip their box orsomething like that and we’re thenlooking at different lenses we say righthow are we going to get the amount thatyou want and that could be when we thenlook at an interest-only loan becauseit’s interest onlyum and not Captain repayment you’re notpaying the interest back which meansthatum the repayments on a light for likebasis are the same rate are always goingto be lesshoweverit might not be as low 5.6 becausethat’s a really good rate so we mightfind we’re going to a slightly higherrate on an interest-only basis but we’restill able to get you more or the sameexample of that semi-commercial propertycurrent rate with the lender I’mthinking ofum 6.9 percent okaythey will stress at 6.9 percent they’vegot 125 debt service coverage whichmeans uh We’ve again got about threethousand pound a month but it’s oninterest only so the repayments arelower so we can probably get to aroundabout a similar number 550000 pounds on an interest-only basis sowe can still get there 75 load to Value475 000 pounds we’ve done it on interestonly because we didn’t it didn’t fit thecriteria for the other lenderum so so that can work as wellum fully commercial the rates are highera little bit higher so you’re probablyonly going to get to about 500 000 keyPoint here is preparation knowing yourlenders getting it getting everythingset up properly having decent leasesum and we can raise more money andpotentially get lower rates so let mejust give youa few tips on things to think about sothat you can take advantage of this workthat we have to do behind the scenes toget the best deal that you possibly canwhen it comes to either buying acommercial or semi-commercial premisesor remortgagingso a few tips before you start andyou’re not going to tickle these boxesif you do that’s great but you probablywon’t so first of all if you’re buying aproperty uh or you already own aproperty sometimes you have tenants onhold over their leases have expired notgreat some lenders will say not reallyinterested that makes that can makequite a bit of difference because somelenses will ignore that rental incomenow if you’re not trying to push the maxto get to the highest loan amount itprobably doesn’t matter but if you’relooking to get as much out of it as youpossibly can at the best deal thenreally you don’t really want tenants onhold overum leasesif you can have leases of five yearsplusum to run at the time uh Still Still torun at the time you you go for financethat is better that is going to give youmore options that’s going to beattractive to the lenders who will go tonotice in better ltvs but offer betterterms better ratesumhave you got epcs in placeum if you’re buying if you’re buyingsomewhere has it got an EPC becausepotentially you can buy a property whichhasn’t got a tenanton the basis that you can have a leasein place for completion okay so thinkabout that scenario where I’ve seen aproperty that’s great nobody’s going tolend on an empty property because it’sgot no income well I say nobody ifyou’ve got income elsewhere then wecould use that but then you go intolenders who are using external incomeit’s a whole different ball game it getsexpensive so what’s going through yourmind is right I’ve seen a propertyum I’m gonna buy it and I’m going to puta tenant in placeumand you’ve got that tenant all lined uplenders will do that some lenders willdo that but they’ll want to see thatlease in place and signedcompletion so they know that that tenantis going to go in the reason I say epcsare important is because if you haven’tgot an EPC potentially that could giveyou some problems because they’re goingto say can we see your EPC and the otherthing to think about is planning ifyou’ve seen a property andum the planning doesn’t match what thetenant is going to be going to do withinthat property then when it gets to Legalcompletion the solicitors are going tojust throw up the red flag and sayactually you could you don’t haveconsent to put that tenant in there eventhough you might think it’s fine so lookat the planning semi-commercialum if you’re if you’re a generalinvestor you’re thinking where am Igoing to go well I’ll just say to yousemi-commercial generally you’re goingto get better rates than fullycommercial and investment properties solook at semi-commercial and make sureyou’ve got an AST in place for for theum residential elementum and a decent lease for the commercialelementum loan amounts that’s another Factor uhif I we’ve got lenders who who will sayreally we want to be doing 400 000 poundplusum I’ve got a really good lender whostarts at 250.um so you know if you’re buying if iftheir loan is 250 and they’ll go to 7075 loan to value you need to be lookingat properties which are 300 somethingplus so 250 is a magic number 125 isanother magic number and there’s alender where their minimum is 125 under125 000 poundsumthe lenders that used to be quiteprevalent in that area they pulled outof the market and increased their loadamounts massively so there’s not thatmuch Choice once you’re under 125000. 250 is great 125 under 125 000 yesthere are lenders that will doinvestment property but there aren’t somany so just be aware of that becausethat affects priceummake sure you’ve got your deposit thinkabout the deposit you need don’t forgetstamp Duty don’t forget legals if you’vegot enough cash for thatum be aware that uh if you’ve got assetsoutside of the property you’re lookingto buy you might be able to raisedeposits on that but that’s probably aseparate loan purpose of the loan isimportant as well if it’s investment property some lenders again the ones who are the cheapest and the fussiest willthey’ll want to know what you’re goingto spend the money on and want to see that that’s reasonable so if you’re thinking aside I wanted for my daughter’s wedding or togo on holiday well that’s not a commercial use so sometimes might say well we’re not too keen on that so most often people are raising money ontheir existing properties to go and buy another one so so that’s fine and the other thing to bear in mind and this is really important is if you are taking all of that rent out to live on okay and you haven’t got any other income at all then when the lender looks at the application they’re going to say right well you’ve got this rent and I was talking about 50 000 pounds earlier on but you’re taking all of that out to live on therefore if if they use that rent to support the the borrowing then you’ve got nothing to live onand therefore they’re going to say well what happens if there’s a void and howyou’re going to live so they do that inmost cases they’re going to do that plausibility test to make sure thatyou’ve got enough external income now ifyou own this property but you’ve gotyour own business elsewhere and you’re earning off that or your partner at home your spouse has got a really good job and they’re paying for all the household expenses then that’s fine we’ll say okay well you live in costs are all covered so we can use the rent but if but ifif you’re if you’re spending every pennythe rent to live that is going to be an issue so bear that in mind as wella lot there I hope it’s given you a little bit ofa steer hope it’s been helpful if it has been please like the video please subscribe to our Channel if you’re not already subscribed uh because there’s lots and all of this sort of stuff coming outum and uh check us out check everything we do on YouTube there’s a whole load of different playlists there about buy tolet about residential about secured loans about development about bridging and you’ll find that on YouTube Promise money and go to our website promisemoney.co.uk hope that’s helpful talk to you soon bye

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