When a borrower is unable to service Interest from income, the Lender may ask for cash to be deposited with them to cover the future interest payments. This is typically used by Private Banks – a good example would be a company owner that is not drawing enough income to meet their commitments, but has enough money in the company to demonstrate affordability. This is also used by BTL Lenders to cover potential Rental Voids, or if there is shortfall in income cover after tax. Interest Cover is also used in Commercial Property for the same reasons as BTL. It may also form part of the Loan Covenants.
