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How much Deposit is required for a Commercial Mortgage?

One of the biggest things to consider is how much deposits required for a Commercial Mortgage? This can vary between properties and businesses. There are some really good reasons for buying, rather than renting, business premises. The stability is a big point, also is the fact that, in tough economic times, you are not vulnerable to any sudden rent increases.

If the property increases in value, then your business capital will increase too. It is likely that you will be paying similar on your mortgage as you would on rent, but obviously once a mortgage is repaid you will own the property.

The LTV values vary, but are loosely around the following amounts:

  • Hotels and Bed and Breakfasts are usually around 70 percent LTV
  • Land is usually around 50 percent LTV
  • Houses of Multiple Occupancy (HMO) are around 75 percent LTV.
  • Holiday lets are usually around 70 percent LTV.
  • Nursing homes are usually around 70 percent LTV.
  • Pubs are usually around 70 percent LTV.
  • Self-build properties are usually around 55 percent of the end value.

These are average guides, however, and the actual, specific amounts can vary. Different lenders can sometimes offer different amounts and can also vary their offer dependent on the borrowers’ business position. This variation means that seeking advice from an experienced mortgage broker, who has experience in the commercial market, is essential.

Ascot Mortgages are well-versed at dealing with different LTVs and lenders, and can make sure that you get the best deal. Ascot Mortgages will know which lender is the best, for you and your business, based on the deposit and property type that you need, including restructuring existing commercial mortgages and semi-commercial mortgages.

More information about commercial mortgages

  • Most commercial mortgages are for 15 years or more.
  • A clean credit record is also essential to getting a good deal.
  • Lenders will apply a loan to value ratio to the mortgage, and will require a personal financial commitment.
  • The business will need to be profitable, and the lender will need to see evidence of this.
  • Deposits generally are anywhere between 25 and 40 percent of the mortgage required.
  • The amount of deposit can vary depending on what the returns of the business are, and also what type of business the mortgage is for.
  • In addition, the amount of deposit might depend on how much you can afford to repay each month. If the lender thinks that you cannot afford to borrow as much as you need, and repay monthly, then you might need to take a higher deposit.

Whatever the business that you have, similar principles apply. You need to have a comprehensive set of accounts, which provide detail into your businesses’ financial history. You need to prove to the lender that you are a safe bet to lend to, and also that you can afford the monthly repayments.

The Financial Conduct Authority does not regulate some forms of Commercial Mortgages.

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