How is affordability calculated on Commercial mortgages?

For investors Commercial mortgage lenders will use the lease income of the security property, which is the property you are buying or remortgaging.

For business owners Commercial mortgage lenders will use the NET PROFIT of the security property, which is the property you are buying or remortgaging. Using the EBITDA method, the figure used may be adding in or deducting parts of your accounts that will change upon completion, such as swapping your rent against your new mortgage payment.

If you’re purchasing a property as an individual, the financial stress test applied by lenders might be more stringent compared to basic rate taxpayers. For instance, a basic rate taxpayer could be assessed at 125%, whereas a higher rate taxpayer might be evaluated at 145%. For five-year fixed mortgages, lenders often use the pay rate of the product for stress testing, say 5.89%. As an example, for a basic rate taxpayer earning £600 per month in rent, the calculation would be: £600 x 12 / 1.25 / 0.0589, resulting in a maximum loan of £97,792.