Commercial mortgages, sometimes referred to as business mortgages, are mainly for business owners who are looking to buy property or land for commercial use. Commercial Mortgage repayment period can vary. Terms are often dictated by the size of and value of the property, or the available deposit you have.
Deposits can vary, but commercial mortgage deposits tend to be around 30% of the property’s value. The type of business you run can also affect your deposit. We may ask for more deposit (lower LTV) if we consider your business to be more ‘high risk’ - for example, if it’s a restaurant or a bar.
Rates vary, but we tend to favour applicants who have experience in running or letting commercial properties. People who have owned more than one buy to let property for a minimum of two years also tend to be given good deals.
TYPICAL USES
Usually for many businesses that have successfully grown, and who are setting up a new work space or looking to expand beyond their existing business property. It can often be the right course of action for business owners who are looking to avoid increasing rents, or maintenance and management fees.
BUY-TO-LET (BTL) MORTGAGES
As a commercial mortgage is any loan secured on property which is not your residence, buy to let mortgages are a special type of commercial mortgage as well. If you’re planning on buying a property to rent out for extra income, you’ll need a commercial mortgage.
BTL Mortgages is a type of commercial mortgage.
PART-COMMERCIAL / COMMERCIAL RESIDENTIAL MORTGAGES
A part-commercial mortgage is a mortgage for a property that is half business and half residential, such as a flat above a shop or pub, or part-converted offices and flats. These types of properties often fall outside standard residential or commercial mortgage lender terms, so they need a unique mortgage product.
COMMERCIAL vs. RESIDENTIAL MORTGAGES
The main difference between a commercial mortgage and a residential mortgage is that the value of the land or property is usually much larger. Also, because of the sheer variation of land and premises, commercial mortgages tend not to be pre-set products in the same way that residential mortgages are.
ACCESSING COMMERCIAL MORTGAGES
Before you start your commercial mortgage application with us, remember that you’ll need certain documents in order to apply successfully.
Check that you have:
- Recent bank, liability and asset statements records
- Performance figures (both current and projected)
- The details of your partners and directors
- Tax returns (for a period of at least three years).
COMMERCIAL MORTGAGE FAQs
1. Can I get a commercial mortgage on a leasehold property?
Yes, but there usually has to be at least 50 years left on the lease.
2. Can I switch from a residential mortgage to a commercial mortgage without a penalty?
This would be a decision that we can make, on a case-by-case basis. If we say no, then you might have to consider paying off the residential mortgage first, which may/may not incur a penalty. You may then be able to apply for a commercial mortgage.
3. Are there any limits to the kind of business I can run?
A commercial mortgage can be offered for most legal businesses. Businesses which might seem like a poor investment may struggle to get a commercial mortgage.
4. What other fees come with a commercial mortgage?
When applying for a commercial mortgage, you need to consider the cost of:
- Legal costs, including surveys and insurance
- Loan arrangement fees
- Valuation fees
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