Hi guys,
Just wondering what interest coverage are the more hungry Commercial lenders asking for now?
Also are the loans assessed at higher rates like home loans at 7.50 per cent?
Thanks
Yes, generally they are stress tested at a higher rate.
There are some commercial products which are good in that they can disregard the rest of your financial picture which if you have significant existing debts can allow you to grow a portfolio considerably. I’ve written about this here: http://www.precisionfunding.com.au/lease-doc-commercial-or-how-i-learned-to-love-lease-doc-to-continue-investing/
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
Yes, generally they are stress tested at a higher rate.
There are some commercial products which are good in that they can disregard the rest of your financial picture which if you have significant existing debts can allow you to grow a portfolio considerably. I’ve written about this here: http://www.precisionfunding.com.au/lease-doc-commercial-or-how-i-learned-to-love-lease-doc-to-continue-investing/The example used in the article basically confirms and answers OP’s question about if higher benchmark rate is used, correct?
Also, my own experience with two lenders not only use higher benchmark rate but also take 75% of the income for ICR assessment purpose.
Is this the common practice or do some take 100% of rental income and actual rate for servicing and ICR assessment?Thanks,
FXDIt is dependent on the lender and product – generally 80% is the norm for shading of rental income, though there are some lender products which accept 100% of commercial rent after outgoings factored. The article written above is an example of a lender which does this.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
And what is a minimum safe ICR that most if not all lenders will not say no from the outset?
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