A commercial mortgage loan is for property that is not the borrower’s residence. They can be used to purchase business premises and buy-to-let residential property.
Semi commercial property is where a business is conducted, while also providing living accommodation. This type of property includes shops with flats above them, and pubs. If the borrower is using a semi-commercial property as their main residence, a commercial mortgage will usually be required to finance the purchase.
How much can I borrow?
Most lenders will not provide a commercial mortgage loan for under £50,000, with some lenders not lending below £75,000. As most commercial property is valued at far more than £75,000, for most borrowers the minimum amount is not an issue. Theoretically, there is no upper limit, but obviously a lender will need to satisfy themselves that the borrower can afford the mortgage repayments. Most borrowers will require a large deposit of around 30%.
What security do I need?
Usually, the property that the business is buying is used as security. If the mortgage is not repaid then the lender can repossess the building so that they are protected.
If the lender views the loan as high risk, it may also ask for additional security which will normally be other property that the business owns. Other security can be considered, such as company shares or an insurance policy.
How long is the mortgage?
A commercial mortgage can be for between 3 years and 25 years. If a business wants a loan for a shorter period, then a short term bridging loan is more appropriate.
How much is the interest rate?
The interest rate charged on a commercial mortgage is not the same for every borrower. Most commercial mortgage lenders do not promote their interest rates, When you apply for a commercial mortgage a lending manager will assess the application and set a rate based on their perceived risk of the loan. Large loans with low risk will be offered at the lowest rates.
What fees do I need to pay?
Lenders charge an arrangement fee for the loan. This is usually added to the total of the mortgage and included in the mortgage payments. Some lenders will charge a fee if they offer a mortgage and the borrower does not complete the application.
There will also be a valuer’s fee. The valuer visits the property and prepares a report for the lender about its condition and value. This report is used by the lending manager help make his loan decision. The borrower must also pay both their own and the lender’s legal fees .
Where is the best place to arrange a commercial mortgage?
It is advisable to use a mortgage broker to arrange a commercial mortgage. A broker has access to a wide range of mortgage deals, many of which will not be available direct from the lender.
Talk to Ascot Mortgages to arrange a free no obligation discussion about your commercial mortgage requirements.