Commercial Mortgages

What is a commercial mortgage?

Commercial mortgages are loans secured using your current business premises as security, in order to finance the acquisition of premises or land.Typically they might be used as capital to expand a business, sometimes through land or business premises purchase, but they can also even be used to finance property development or purchase business premises to let.

Commercial mortgages allow businesses to borrow far more than they would be able to under a commercial loan, due in part to the fact the mortgage would be on a secured basis. Typically the length of a commercial mortgage would be between 10-25 years and the minimum amount lent would be around £25,000.

What types of commercial mortgage are there?

Commercial mortgages largely consist of two types: owner-occupier mortgages and commercial investment mortgages. Both types require a deposit much higher than a residential loan, in the region of 25-30%.

An owner-occupier mortgage can be used to purchase a property for that business to operate from, whereas a commercial investment mortgage is typically used for the purchase of a commercial property that is intended as an investment and to be rented out.

A specialist mortgage advisor will be able to get you access to the best rates and deals to suit your own business circumstances. We can introduce you to brokers who provide top commercial mortgage advice and have access to a huge network of lenders with the best commercial mortgage deals for businesses of varying size and needs.

How does a commercial mortgage work?

A commercial mortgage works in a similar way to a standard residential mortgage with the borrowing paid back in regular instalments over a set period of time, usually up to 25 years, although 40-year terms are not unheard of. Most lenders will let a business borrow up to 70% of the property’s value, though we could help you if you need a loan to value greater than this.

Typically, businesses need to provide a deposit, although another property could potentially be used as security. A commercial mortgage can be taken out on a repayment basis, whereby the loans and interest are paid off at set intervals, or the mortgage could be on an interest-only basis, with the interest needing to be paid off each month, and the capital debt paid at the end of the loan period.

The loan rates you might be offered are determined by a number of factors based on the perceived level of risk in lending to you. Lenders will look at your current and past business performance as well as your credit history and type of property you are looking to buy. Having a good deposit can help us secure you the best deals.

How to get a mortgage on a commercial property

Commercial mortgages are bespoke and are best handled on your behalf by a specialist advisor. We can introduce you to brokers who have access to a huge network of lenders, so you’ll get the best deal most suited to you and your company’s circumstances.

In support of a commercial mortgage application you’ll need to provide a raft of documentation including bank statements and trading accounts for the last 3 years in order to prove your ability to afford the mortgage. A business plan may be required for some small or relatively new businesses.

By engaging the services of a commercial mortgage advisor will ensure you are well prepared to make your application and will have the best chance of successfully securing the funds you require.