Looking to purchase a property for your business? Then a commercial mortgage is the product for you.
Commercial mortgage rates are not standardised in the same way as residential mortgages. They’re individually priced to match the strength of proposal, which makes negotiating one more complex.
This means that first-class negotiation skills and a high level of attention to detail are required in order to source the best and most appropriate commercial mortgage deal available – and to close that deal so that your business venture can begin!
You can’t use a regular mortgage to buy a business premises and there are a lot of different elements to a commercial mortgage that make it a specialist product.
We act as introducers to a range of commercial mortgage providers. We make sure that your loan application is presented correctly and in your particular lender’s preferred format. If you need help with a commercial mortgage, contact us now.
How does a commercial mortgage work?
Although a commercial mortgage is specifically created for a business premises, the way they work from a financial perspective is very similar way to a residential mortgage. The commercial/business property is used as collateral for the debt. If the borrower defaults, the lender can repossess the property, much like your home if you do not keep up with the repayments.
Commercial mortgages are predominantly used to purchase business premises like an office, warehouse, or shop store, but can also be used by companies who want to invest.
Much like a re-mortgage, a commercial mortgage can be used to release equity. Commercial mortgages also help if a business wants to take on more staff, purchase new equipment, or buy a plot of land and build on it.
What deposit is needed for a commercial mortgage?
As with any mortgage, the unique circumstances make this a difficult question to answer in full. It always pays to speak to a mortgage advisor. The deposit you need for a commercial mortgage very much depends upon the particular proposition put to the lender.
For simplicity and to give you an idea, the minimum deposit would be 25% of the purchase price/value of the property that you’re applying for a mortgage for. As always, please do speak to us before making any decisions based on generic advice.
How much will banks lend for commercial property?
Banks are happy to lend for commercial property much like they are for residential property so long as their lending is against a sound investment. You could be looking at anywhere from £50,000 at the lower end of the scale to several £million at the upper end.
All mortgage applications (residential or commercial) are taken case by case. Each one will present some challenges and situations that need bespoke attention and products.
Are commercial mortgages more expensive?
Generally speaking, yes – commercial mortgages are more expensive than regular mortgages.
The main reason for this is down to the risk involved to the lender. The ability to service the mortgage and pay off the borrowing is largely dependent on how well the business performs. If the business doesn't perform well, and the worst-case scenario happens, the lender will have limited assets to get their money back.
Because of this heightened risk to the lender, you could be looking at rates from 3.5% upwards, although lower rates may be available, depending on the proposition and situation.
Commercial mortgage fees are wide-ranging, but could include:
- Arrangement fee
- Commitment fee
- Valuation fee
- Legal fees
- Broker fee
What documents will I need to supply for a commercial mortgage?
You’ll need some key documents for a commercial mortgage and these are:
- Two to three years’ accounts and/or tax returns.
- Current and projected accounts.
- Bank statements.
- Details and profiles of directors/partners in the business.
- Asset and liability statements.
- Credit history.
If you want to re-mortgage your commercial property, please get in touch for first-class advice.
If you need a semi-commercial mortgage to purchase a property that is part residential and part commercial, we can help.
For further details, speak to a helpful member of the Mortgage Search Go team on 0844 69 333 60 or click here to contact us.