FAQs – What’s The Maximum I Can Borrow?
This week we’re starting a series of blogs around FAQs – Frequently Asked Questions.
In our years of working with clients, we’ve discovered that the same questions get asked regularly.
So, over the next few weeks, we’re going to answer some of the most commonly asked questions.
We start this week with FAQ number 1.
This particular question gets asked in a variety of ways:
- How much can I borrow?
- What’s the maximum I can borrow?
- What loan to value (LTV) can I borrow?
- What’s the maximum I can borrow against my property?
Regardless of the way, the question is phrased, the essence of the question is essentially the same. Whether it’s a purchase or a refinance, fundamentally clients want to know the maximum they can borrow against the value of the business premises or commercial property in question.
So, what’s our answer?
Firstly, let me give some context to the question. By definition, the question is property-related.
In other words, the client will either own existing business premises, or they are looking to acquire a new business premise.
And of course, business premises come in all shapes and sizes:
- Retail units
- Warehouses
- Offices
- Hotels
- Care homes
- Catering premises
- Commercial yards
- Investment properties
- Petrol stations
- Land
And the list goes on…..
So, what’s the answer to the question?
What is the maximum loan against the value of a property?
Our answer is always the same; in the region of 70% of the property value. But it depends.
Let me explain.
Most lenders will consider 70% of the value of the property in question and this is fairly standard, regardless of whether you approach your own bank, or you decide to approach one of the challenger banks or perhaps a specialist lender.
However, as with most things, it’s never quite that straightforward!
The type of property is important as is its condition and location. It is also important that the business that will ultimately service and repay the loan is a sound business. As a result, 75% or even 80% of the property value can be available.
However, the reverse is also true. If it’s a less attractive property type in poor condition, or the trading business has poor accounts, then the loan to value is likely to be much lower – in the region of 60% – 65% or sometimes even less.
Our suggestion is that you provide as much information as possible relating to the deal – including details of the property as well as accounts for the business that will be occupying the property.
The lender or broker you’ve approached will then be able to give you an indication of how much you should be able to borrow.
Bear in mind that one of the important requirements is a valuation of the property in question and of course if the property down values, whilst the LTV ratios may remain the same, the actual amount you can borrow will reduce.
Unfortunately, the maximum loan you can borrow against the value of a property is not an exact science, there are broad parameters as a guide, but at the end of the day, each deal is very much looked at on a ‘deal by deal basis.
If you have a requirement for business or commercial finance and you’d like to talk to an expert to find out more about the maximum loan you may be able to borrow, then why not get in touch? Our contact details at Funding Track are 020 3857 3030 or email us at enquiries@fundingtrack.com
Next week’s FAQ is a very common question: What is the interest rate?
