No matter how big or small your business is, we can help you find the best commercial mortgage to suit your requirements
A commercial mortgage is a loan from a lender secured against a property which is not your main residence. A commercial mortgage loan can be used to purchase residential Buy to Let Properties either singularly or as part of a portfolio of properties. Alternatively, you may be looking to purchase commercial properties such as shops or factories, which are either owner occupied or investment properties, and again singularly or as part of a portfolio.
Commercial mortgages are used to help raise funds that can be used for a variety of purposes, such as buying your business premises, purchasing the whole of an established business or unlocking some of the capital tied up in your existing commercial premises.
The minimum amount of commercial finance available is £150,000 with no maximum figure. Providing that the underwriting requirements are met when applying for your business mortgage, you shouldn't have any problems in sourcing the funds you need to make that all important purchase.
We compare commercial mortgages for a range of borrowers, including Personal Applicants, Sole Traders, Partnerships, Limited Companies, Limited Liability Partnerships and Trusts.
Commercial mortgages are strictly for non-residential properties while buy-to-let lending relates to properties that are let out to paying tenants. Buy-to-let mortgages are made available by both commercial and residential lenders.
They are a particular type of high-volume and borrowers can fall into three different categories:
This relates to the large number of landlords who purchase property as an investment. The owner of a buy-to-let property can benefit from any increases in property value and can use the rental income to meet the mortgage repayments.
Financers can offer lower interest rates to buy-to-let investors than for those needing mortgages for commercial properties because of high consumer demand.
Relocation, failure to sell or moving in with a partner can all lead to homeowners who become landlords. An increasing number of people are becoming accidental landlords who have property to rent out because of a change in their circumstances.
More often than not these properties will have been initially purchased using a standard mortgage. In these cases, owners are advised to check their mortgage is appropriate and ensure they are filing and paying the correct tax.
Capital gains tax (on any gains over the initial purchase price) will be charged at 18% upon selling the property (excluding advance rate taxpayers).
Homeowners becoming landlords for the first time should also be aware of tax deductions that cover letting fees, repairs and maintenance, energy efficiency improvements and mortgage interest charges.
Student accommodation and professional house shares can be classed as HMO properties. Despite being seen as a higher maintenance option for buy-to-let purchasers they can be potentially more lucrative.
Figures released by Platinum Property Partners reported that HMOs outperformed standard buy-to-lets by 40% in the four years to 2014 in calculated profits.
Considerations that lenders will make on these types of properties include risks involved in letting the house to more than one resident. The main reason for this is that there is a greater chance that damage could be caused to the property.
This is a completely free, no-obligation service that leaves no credit footprint
Property types which are suitable as security for the lender include residential, semi commercial and commercial property.
The lender will normally require a legal charge over the property that the finance is being raised for. Lenders will consider additional security where required in support of the loan - this means that you may be able to borrow up to 100% of the purchase price of the property.
Dependent on the type of property being purchased, you can borrow up to 85% of the purchase price or valuation for residential properties, and up to 80% for commercial properties.
One of the main things to consider is how much deposit is required in order to secure your new property. You'll often find that the deposit required varies between residential properties and businesses. Don't be put off by this, there are some great reasons for buying, rather than renting a business premises. Stability is a key factor, along with the certainty of being in control of your monthly repayments. This means that you are not vulnerable to any sudden rent increases.
A big benefit is if your property increases in value, then your business assets will increase too. It is highly likely that you will be paying a similar amount as you would on rent. Unlike rental properties, once you've settled your mortgage in full, you will own the property.
LTV values vary, however you can typically expect the following amounts:
The LTV's provided are to be taken as a guide, as circumstances will determine the maximum LTV and actual deposit required. Lenders can offer different amounts and will also vary their offerings dependent on the borrowers' business and financial position. Due to this seeking advice from an experienced mortgage broker, who has expertise in the commercial market is essential.
Usually a remaining lease of 70 years will be required on the commercial property. If this is not the case, then additional security maybe required.
Commercial mortgages are usually for amounts in excess of £150,000 and can have terms of between 1 and 30 years. Shorter business finance can be arranged where required.
Variable rate loans as well as fixed rate loans are available. Dependent on the lender, they may also quote an interest margin over either Bank of England Base Rate, or Bank LIBOR.
Interest rates are not always pre-determined, and some lenders will assess the application on a case-by-case basis to establish a suitable interest rate. Generally, the less risk the lender perceives, and the lower the loan to value (LTV), the better the rate of interest will be. Interest only loan commercial mortgages are also available.
When it comes to repaying, business mortgages work in the same way as residential mortgages. There are a number of factors to be considered, depending on the mortgage you agree to, which include:
Repayments on your mortgage will be made over the agreed term of your mortgage, which is typically repaid by Direct Debit in monthly instalments.
The amount you will repay per month will be calculated based on the loan amount and interest applied. To find out how much your repayments would be, compare business mortgages online.
Ensure you keep up repayments on your mortgage, as falling into arrears will put your property at risk, which may be repossessed.
As with any savvy business commitment you need to shop around to get the best business finance deal for you and your enterprise. Before enquiring you need to be sure that the mortgage you require is for business use and that you are a sole trader, partner or director with the authority to borrow on behalf of your business.
You need to have a clear idea of how much you want to borrow, what time period you'd like to make the repayments over and exactly why you need the new commercial premises. Make sure you gain an understanding of what your repayments will be, you can do this by using a commercial mortgage calculator. Some business mortgage deals will also have arrangement fees, which you'll be guided through.
In order to secure your loan, an assessment of affordability will be made by lenders and security in support of the loan will be considered.
The interest rate you are quoted is likely to take into account past performance, the current position and long-term future plans.
The interest rate can fluctuate based on this information.
Both commercial and buy-to-let mortgages are underwritten according to debt-service coverage. This relates to the amount of cash flow available to meet annual interest and principle payments on debt. Put clearly, the ability to pay!
Clarity of information will boost your chances of securing the best business finance deal for your SME or buy-to-let property and ensure you'll have the keys before you know it!
In some circumstances lenders require additional security when offering commercial mortgages. To help offset their risk of lending to you, be prepared to potentially provide additional security which may include an existing residential property. It's important that you can keep up repayments otherwise your business premises may be repossessed.
Compare business mortgage deals and we'll help you finance your business premises. We just need you to tell us a bit about your business and what you need, we'll then compare the deals in the market to give you best solutions for your business.