What is a Commercial Mortgage?
Commercial mortgages are basically for buying business premises. They come in two types a business mortgage for buying property to trade from e.g. a shop, workshop etc. or a commercial investment mortgage this is when you are buying property to invest in for their capital appreciation over time or their rental potential. In business it is important to structure your finances getting the best rate on a commercial mortgage or commercial loan is essential in keeping the costs down on your investments.
As with any mortgage product there are certain criteria that needs to be met. Commercial mortgages can be complex depending on the property or investment. Its usually a good idea to speak to a specialist that knows the market and has good relationships with commercial lenders. This will give you an idea of which lenders are willing to consider your application when taking into consideration yours or your businesses circumstances.
How do i get a commercial mortgage?
Commercial mortgages are generally for clients looking to borrow over £25,000. If you are looking to purchase a premises or investment opportunity then a commercial mortgage is for you. To secure a commercial mortgage lenders ideally like to see a Loan to Value ratio no higher that 70%, if you don’t have the capital for the deposit some lenders will take other property into consideration such as a residential property.
Commercial mortgages tend to be from 3 to 25 years. Shorter term loans are available but these are known as bridging loans, which tend to be from a few weeks up to 24 months. It can be difficult to find accurate rates online for a commercial mortgage. This is due to the complex nature of these financial products. Each case is viewed on a case by case basis and a lot of information is required for the lender to calculate the risks and determine the rate they are willing to offer. Lenders normally have the risk profile that they will lend to and if you fall out of this profile your application will be rejected, this is why it is important for you to speak with an experience commercial mortgage broker who will have a good relationships with lenders and be best place to find lenders suitable for your circumstances. You can use our commercial mortgage calculator to estimate your monthly repayments on the loan you require and do your own affordability checks to see if it is affordable for you.
Commercial Credit Score
Every business looking to secure a commercial mortgage must have a strong enough credit history. Depending on how highly your business scores will determine if a lender will lend to you and also the rate you will be given. A higher rating generally means you will get better rate. If your business has a long standing trade history and healthy profits and no adverse credit you are likely to have a high commercial credit score. If your business has only been trading for a short time or are in the start up phase you wont have a score and a different method of financial assessment will be required, this is where personal guarantees or additional securities will come in.
Other Factors Lenders Will Take Into Account
When assessing you and your business to see if a lender is willing to lend and agree terms they will normally use the following
Affordability – Can the customer afford this loan, is the business in a strong enough position now and will they be in the future to keep up repayments
Rate – This will depend on the type of borrowing you are looking for, your adviser will be able to guide you on the best route
Security – Commercial lenders will usually require security to ensure that if something where to go wrong they would be able to recover the loan.
Deposit/Equity – LTV will differ from lender to lender. Each lender will have a minimum loan to value they will accept
Types of Commercial Mortgages
Typical commercial mortgages come in two kinds
If you are looking for a mortgage to purchase premise for your business such as an office you are looking for a business mortgage also known as an occupier mortgage. Owner occupier mortgages can normally get a loan to value ration of up to 80%. If you are looking at buying your premise or looking to grow and purchase a new premises get in touch and one of our experienced commercial brokers will help you to get the best rate
Commercial Investment Mortgage
If you are looking to invest in a commercial property and rent it out to other businesses this is called a commercial investment mortgage.
Below is a list of some of the Leisure property mortgages including:
Leisure Property Mortgages:
- Mortgage for restaurant
- Mortgage for pub
- Mortgage for cafe
- Mortgage for bar
- Mortgage for hotel
- Mortgage for B&B
Retail property investment including:
- Retail units
- Retail parks
Office property including:
- Mortgages for offices blocks
- Mortgages for offices above shops
Industrial property mortgages including:
- Mortgages for light industrial units
- Mortgages for industrial parks
- Mortgages for warehouses
- Mortgages for factories
- Mortgages for storage facilities
Care home mortgages including:
- Mortgages for nursing homes
- Mortgages for rest homes for the elderly
- Mortgages for hospices
Professional property mortgages
- Mortgage for veterinary surgeries
- Mortgage for doctors’ surgeries
- Mortgages for private schools
- Mortgages for nurseries
- Mortgages for farms
- Mortgages for farm buildings
- Mortgages for agricultural land
- Mortgage for small holding
Sometimes an HMO Mortgage can be classed as a commercial mortgage if it is for a large property or a portfolio of properties, luckily we have HMO Mortgage experts and can help you to secure a great deal.
If you want to find out if you or your business can get a commercial mortgage then get in touch with one of our commercial mortgage specialists who will be able to lead you through the application process and help you to secure the best deal for your circumstances.