How much can I borrow?

How the borrowing calculator works

On lease-backed supported housing, lenders size the loan from the income, not just the price. The lender takes the passing rent under the registered provider lease and applies an interest cover ratio so the rent comfortably covers the loan interest. We take your annual lease rent and divide by the cover ratio to find the maximum annual interest the asset can service, then divide that by the interest rate to find the indicative maximum loan. Note that lenders generally use the passing rent today rather than projected indexed uplifts, so enter the current rent.

The formula is maximum annual interest equals income divided by the 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 debt service cover drives the loan

Lenders want headroom so the loan stays serviceable if a rent is renegotiated, a provider is replaced at a lower rent, or a void arises between leases. They usually set cover ratios between 125 and 145 percent and price the loan accordingly. A higher ratio means a stronger cushion but a smaller loan. To model the deposit and monthly cost once you have a loan figure, use our commercial mortgage calculator.

Worked example

On a supported living block producing 63,000 pounds of lease rent a year, at a 6 percent rate and a 130 percent cover ratio, the maximum annual interest is about 48,500 pounds and the indicative maximum loan is roughly 808,000 pounds. Enter a 900,000 pound price and the implied loan to value is around 90 percent, far above what any lender would advance, so the loan to value cap becomes the binding test and the loan drops to around 585,000 pounds. This is illustrative only and not an offer of finance. Send us the deal for a real view.