Commercial Mortgage at a glance….
Commercial & Business Mortgages are, as the name suggests loans secured against a property which has a commercial, industrial or business use. Although a commercial mortgage may be made to a limited company, partnership or LLP in most instances the lender or bank will require personal guarantees from the directors or partners to support the borrowing.
Unlike residential mortgages, the information the lenders require is normally greater and the legal process is more involved too, so it’s really important to make sure the lender is provided with as much information at outset as possible to avoid delays.
Although commercial lending rates are based on Bank Base plus a margin, there are, as per residential mortgages, generally fixed and variable rate options available too.
Why are commercial mortgages different…..
A commercial mortgage or BTL (Buy To Let) mortgage can not be obtained or secured on any property where the applicant or their immediate family occupy (live in) This is a regulatory matter and is to ensure a borrower with a commercial or buy to let mortgage does not use the property as their home or main residence. See more on regulation
Unlike residential mortgages, it is generally the business that is applying for the commercial mortgage which must prove it financially stable, has accounts and financial information to prove the monthly payment are sustainable and affordable.
With regulation regarding borrowers occupation of their own BTL mortgages becoming significantly more prescriptive the implications for mis-use are very serious.
Development lenders are generally different from Banks and institutions which provide long term mortgages. Their expertise, staff and experience allows them to assess proposals very quickly and to determine if the re-sales make the project and costs viable. Development lending can be available for small one unit conversions through to massive housing schemes, but they all have one common connection – it is NOT long term lending and is expected to repaid or “rolled over” within 12 > 24 months
In most cases, interest on development finance is only paid on the funding which has been drawn down (outstanding) interest can be added to the loan rather than serviced monthly and this makes logistics and administration easier for the developer.
Can I have a commercial mortgage in my own name?
If you are a sole trader and want to buy or remortgage a commercial property it is not unusual to apply for a commercial mortgage or commercial re-mortgage. It is possible to set up a limited company which is formed for the specific purpose of owning the business property only.
Can I arrange a commercial remortgage to raise capital?
Lenders recognise that commercial buildings, offices and factories represent very good investments and provided there is proof the borrowing can be serviced, the loan to value is reasonable and the reason for raising capital is valid, a commercial remortgage is sometimes a very effective method of raising capital.
Can I get a commercial mortgage on a shop with flat above?
It’s said the UK is a nation of shop keepers! Well lenders recognise a freehold of a shop which contains flats on the upper parts, even if they are already sold on long leases represent good investments and can provide the business owner with a rent free commercial premises.
Our charges are usually 0.5% of the loan. i.e. on a loan of £100,000 our fee is £500.00