There have been increased pressures on buy-to-let landlords, what with stricter affordability tests and decreases to tax relief on buy-to-let mortgage interest payments causing many landlords to look beyond residential property. In an effort to improve profitability, many landlords are looking at commercial and semi-commercial property. Lenders are recognising this and adapting to help them.
Commercial property is often more expensive than residential property, so landlords need a higher-value commercial mortgage. Many lenders are willing to lend on high-value properties and do not necessarily see them as high risk, so interest rates can be reasonable and loan-to-value rates can be the same for both large and small loans.
One advantage that commercial property has is that tenants tend to stay for a long time and rental income can be high. This can make investing in commercial property safer than residential property, where landlords sometimes experience long periods without tenants.
The large high street banks have tended to concentrate on commercial mortgages for larger businesses, but there are many alternate lenders who provide commercial mortgages to individual landlords and small businesses.
Some lenders are offering interest-only loans, which can make a loan more affordable. Many lenders are flexible and will assess a commercial mortgage application on an individual basis rather than applying fixed rules.
A mortgage broker can arrange a commercial mortgage. It helps to use one who is an expert in the commercial property market and can find the best mortgage deals for the investor.