All you need to know about Commercial Mortgages

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What is a commercial mortgage?

A commercial mortgage otherwise known as a business mortgage, is a medium to long term loan, lasting up to 25 years that can be used to fund the purchase of a business premise. Commercial mortgages are structured to suit both the lender and the borrower. The lender will need to see security and a return on their loan and the borrower wants to benefit through access to capital and affordable monthly payments. They will usually provide around 70% of the property’s value.

Commercial mortgages can be used for a variety of reasons including:

Releasing capital from an existing building, which can be invested back into your business.
Used to buy an investment property to be let out to a third party.
Used to refinance any property for business purposes.
Expanding an existing business for property development.

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Types of commercial mortgages

Owner occupier mortgages

This is when the business owner is looking to buy a property in which they can run their business and conduct  their business affairs.

Commercial investment mortgages

This can be used if you are buying a property as an investment opportunity, including renting out the property to other businesses. 

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Pro’s of taking out a commercial mortgage

The interest on your commercial mortgage can be  tax-deductible

If your property increases in value, your available capital could also increase

You can rent out the property for extra income

You can choose a convenient location for you and your business

You have the freedom to adapt, modify and decorate as you wish

Potential drawbacks of taking out a commercial mortgage

You will have to factor in having to buy equipment, furniture and setting up appropriate insurance

Should your company expand or market conditions change, you  may wish to move premises, which may be slightly trickier if you own the building. 

Getting a commercial mortgage with bad credit

Even with bad credit, you are able to get a commercial mortgage, however it may be slightly harder to acquire the loan. A number of mortgage providers will still lend to people with poor credit however this can help to start cleaning up your score. Furthermore, once your credit score has improved from taking out a commercial mortgage, you will have the opportunity to remortgage to a cheaper deal. 

Points to consider when taking out a commercial mortgage

Commercial mortgages deposit

Deposits for a commercial mortgage can sometimes be quite hefty, (around 30%), therefore it is a good idea to ensure you are able to pay both the deposit and monthly payments.

Time you have been trading

If you haven’t been trading for long, lenders may see this as a high-risk case and request personal guarantees. 

Using a mortgage broker

It is best to use a commercial mortgage broker who is able to navigate the business mortgage world and are able to find mortgage deals that are not available on the high street market. 

How can we help you at Mortgages and Insurers Solutions?

As experienced award winning mortgage advisors who are experts in providing residential mortgages, we are able to help you find a lender who will meet your criteria in regards to deposit amount and lowest overall costs. We handle the entire process from start to finish, from sourcing the best product, checking your documentation and profile meets criteria, applying directly online with most lenders, obtaining an agreement in principle within 24hrs of receiving your documentation, dealing with any lender or valuation queries, emailing you a copy of the mortgage offer, ensuring all necessary insurances are in place and liaising with your solicitor to ensure completion takes place at the earliest opportunity.  We are in the market everyday so you don’t have to be.  

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