Factors affecting your commercial mortgage application
- A deposit of 20% or more
- Proof of experience in the sector
- Good personal credit history
- If you currently operate a business the lender will ask to see your businesses trading accounts to prove business competence
- Comprehensive debt proposal from Stewart Hindley & Partners
What is a commercial mortgage?
The biggest difference with other type of mortgages, such as a residential mortgage, is the type of property for which funding is required; in this case it would be an office, industrial unit or a shop for your business to use. The property might actually be an investment to you, where tenants pay you a rent and in turn you pay the mortgage.
The standard process is that an application is submitted by us, the property is valued and when approved, a mortgage offer is issued by the bank and the transaction is completed.
In addition, because commercial properties can take longer to sell than residential property, all lenders regard them as a higher risk, and for this reason the customer normally pays a slightly higher interest rate.
Commercial mortgages generally take over where business loans end. Small Business loans up to £25,000 are unsecured, but for larger amounts lenders require security in order to reduce the risk to themselves. Because of the legal and administrative costs of taking security on commercial property, it is considered uneconomic to borrow under £100,000.
It makes sense to use a specialist commercial broker who has the contacts and market knowledge to get you the best deal. The broker has to present your case to the lenders, so you must be truthful and fully co-operative in your dealings with your broker.
Do not try to use several brokers simultaneously, you will be embarrassed and may end up empty handed. Brokers who are members of the NACFB can be relied upon to have Professional Indemnity insurance and to abide by a code of practice.
For owner-occupied property, you can achieve a 70-75% mortgage. If it is an investment property, the amount you can borrow will be determined by the rental income generated by the investment – this cannot exceed 65% of the purchase price.
Commercial Mortgage – any premises where a business is trading from will need to be financed on a commercial mortgage. Mortgage terms tend to be between 15 years and 20 years although there are some lenders who will go to 25 years.
Lenders will not necessarily deal in all commercial areas some specialise in say retail sectors, specific business sectors (hospitality, scientific, pharma etc.), agricultural, equine and marine sectors.
Working with a broker means you can access the right lender(s) and get the best rates available given your circumstances and the property you are purchasing. We take the strain and do all the work for you. Contact us today to discuss your plans/requirements.
There are lenders who will offer 5 – 10 year terms where perhaps the mainstream lenders would not be content to lend
Bridging Finance – Whilst bridging finance is a more expensive option it can get you to where you want/need to be. Most bridge terms are over 12-18 months although there are some companies who will go to 24 months, however, by the end of the term you need to have a robust exit strategy. This needs to be either refinancing onto term debt or you will need the cash to repay the loan.
What will it cost you?
Your monthly business mortgage payments to settle interest and capital will be…