What is a business mortgage?
If you are a business owner and are looking to purchase or remortgage a property for use as your business premises, such as an office or a shop. Business mortgages are known as a owner-occupied commercial mortgage which essentially means you will need a commercial mortgage.
Unlike traditional residential mortgages business mortgages tend to be manually underwritten. Traditional mortgages are more likely to have a computerised decision based on the information provided. It is even more important to ensure that your application is well presented to secure your mortgage. To ensure that your application has the best chance of success it is best to get help from a commercial mortgage broker. Get in touch today to speak with an experienced specialist.
Business Mortgage Criteria
Whether you are a start-up or an established company there is criteria that you will have to meet for a lender to accept your business mortgage application. Each lender is different and criteria can vary considerably. For example one lender may reject you for an adverse credit event in yours or your businesses past whereas a different lender may still be willing to lend to you. This is another reason to speak with a specialist who has knowledge of the lending criteria for each lender.
In General Lenders like to see a clean credit record, although there are still lenders that will accept a bad credit history. The better your credit history is the more competitive deals will be available for you. Lenders will also look at the ration of loan to value (LTV). The larger amount you have the more chance you will have of securing a business mortgage at the best rate. Lenders will want information on your business to see the profitability, they may also want to see projections for the future, and this is to ensure that the business is growing or at least not going to be under any short term financial pressure.
Business Mortgage Rates
Business mortgage rates will vary and the rate that a lender will give you will be based on yours and your business circumstances. If you have a large deposit, a growing business and a good credit history you will be able to get a more competitive rate. Rates can vary from as little as 2.25%. Speak with one of our specialist business mortgage brokers and they will search the whole of the market for you and make sure you get the best deal for you and your business. Interest only business mortgages are also available but these are usually capped at a slightly lower LTV.
How Much Can I Borrow?
Business mortgages usually range from £25,000 upwards with no real limit as long as the lenders criterion for large loans is met. Maximum loan to value you are likely to be able to get is 80% which means you will need 20% deposit or another asset to use as your deposit.
The repayment terms for business mortgages can be from 5 to 20 years depending on your age and other factors. Some specialist lenders can offer up to 30 years so if you need a longer term speak with one of our specialist brokers today.
Costs of a business mortgage
When calculating the cost of a business mortgage the biggest factor will be the interest rate. To work out the interest rate a lender will give will depend on the below
- The businesses Finances
- Loan Amount
- Deposit size/ Loan to Value
- Credit History
Once the lender has calculated the affordability and level of risk they will tell your broker the interest rate at which they will lend. There may be other costs associated with taking out a business mortgage such as an arrangement fee (usually between 0.5% – 1.5%) and also a valuation fee. Ensuring that you search the whole of the market and make sure your application is well presented is essential to ensure you can get the most competitive rate. Use our calculator to estimate your monthly mortgage costs.
Getting a Business Mortgage
Usually a business mortgage application can be completed in 6 weeks, although you will be able to get a decision in principle and the rate of which a lender will lend in a matter of hours through a broker, provided you have all the essential documents and evidence needed. Valuations and the legal side can slow the process but if you are using a commercial mortgage broker they will handle all of this for you ensuring that your mortgage can be completed in the quickest time possible.
The quality of the information that you provide the lender will also be key in determining the time taken to completion. Working with a broker can be valuable as they will know exactly what you need and how to present this information to a lender.
When applying for a business mortgage most lenders will need to see the following
- Latest certified accounts for the last two years
- Asset & Liability statements
- Business & Personal Bank Statements (usually 6 months)
- Photo ID & Proof of Address
Expert Business Mortgage Advice
If you are ready to start the process of getting a business mortgage get in touch with us to speak to a knowledgeable expert with experience helping business owners get the mortgages they need at fantastic rates. Fill in one of our enquiry forms or give us a call today.