Commercial Mortgage Advice

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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.

 

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 

 

Business Mortgage

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

Agricultural mortgages

  • Mortgages for farms
  • Mortgages for farm buildings
  • Mortgages for agricultural land
  • Mortgage for small holding

 

 

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.

Why use a broker?
With our expertise and in-depth knowledge of the commercial mortgage, we can quickly establish which lender is most in line with your needs and goals. You could make multiple inquiries yourself and if you are lucky you might hit on a good deal. However multiple enquiries could damage your credit rating. Take the sensible route and call us now.
What is the eligibility conditions?
The eligibility for commercial mortgages varies dramatically so we recommend that you talk to our friendly professional mortgage advisors for an individual analysis. Typical basic criteria:-

  • Three years account
  • Substantial deposit or additional security
  • Good credit history
What is the arrangement fee?
Arrangement fees vary from lender to lender and reflect the perceived risk of the venture. Typically arrangement fee for commercial mortgages ranges from1% to 3%. The fee is usually included in the loan and deducted on completion. Some lenders require an upfront nonrefundable fees as a show of good faith. Your mortgage advisor will take into account any fees when making his recommendations.
Can I mortgage leasehold properties?
Yes, you can raise a mortgage on leasehold property. There is a restriction, the term remaining on the lease. Most lenders require at least 40 years to be remaining on the lease. There are no restrictions on buying freehold properties.
What Fees are their?
The fees vary depending on the lender, but broadly fall into four categories:-

  • Legal fees- for both yourself and the lender
  • Arrangement fee- usual a percentage of the loan 1-3% included in the loan and deducted on completion
  • Valuation fee- varies depending on the property and its value. A surveyor will write a report for the lender following a visit to the property.
How much of the property value can I borrow?
Normally up to 75% of the valuation of the property. You can extend this by providing additional security such as allowing a second charge on your home. If you have sufficient security you can get upto100%, ask our advisor for details.

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