Commercial Mortgages
Commercial Mortgages are used for purchasing or refinancing commercial properties, like offices, retail spaces, or warehouses. They're essential for businesses looking to own their premises or for investors seeking property investment opportunities.
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*This loan example is for illustrative purposes only. All finance and quotes are subject to status and income. Click here to check your eligibility to receive options tailored to your circumstances.
How It Works
Similar to residential mortgages, these involve monthly repayments covering the borrowed amount and interest. They can have terms ranging from three to 25 years, and the loan-to-value ratio (LTV) usually goes up to 75% of the property’s value.
Eligibility and Application
Eligibility depends on your company's trading history and financial health. Lenders typically require two to three years of filed accounts. The application process involves an ‘asset liability’ form, a mortgage application, and legal information about your company.
Types of Commercial Mortgages
These fall into categories like owner-occupied, commercial buy-to-let, and residential buy-to-let, each suitable for different investment strategies. The choice depends on how you plan to use the property.
Interest Rates and Fees
Interest rates can be fixed or variable, influenced by factors like loan size, LTV, credit history, and business financials. Additional fees include arrangement fees, valuation fees, and legal costs.
Advantages and Considerations
Commercial mortgages offer a way to invest in property, potentially yielding significant returns. However, they are secured loans, so your property is at risk if repayments aren't met. It's crucial to consider the total cost, including fees and interest rates.
Lender Landscape
Lenders range from high street banks to challenger banks and niche lenders. Each offers different advantages, from lower rates at high street banks to more flexible criteria at niche lenders.
Preparation for Application
To expedite the process, prepare necessary documents like proof of identity, address, recent bank statements, trading information, lease agreements, and a solid business plan if required.
Frequently asked questions
What is a commercial mortgage?
A commercial mortgage is a loan secured against a commercial property, like offices, shops, or warehouses, used either for business operations or rental income.
Who can apply for a commercial mortgage?
Any business entity, including sole traders, partnerships, and limited companies in the UK, can apply, as long as they can provide collateral in the form of commercial property.
How much can I borrow with a commercial mortgage?
Typically, you can borrow up to 75% of the property’s value, but this can vary depending on the lender and the property type.
What are the repayment terms for commercial mortgages?
Repayment terms can range from 3 to 25 years, depending on the loan amount and the lender’s policy.
What types of properties can be financed with a commercial mortgage?
Commercial mortgages can finance various types of properties, including retail spaces, office buildings, industrial warehouses, and sometimes mixed-use properties.
Are the interest rates fixed or variable?
Interest rates can be either fixed or variable. Fixed rates provide consistent monthly payments, while variable rates can fluctuate with market conditions.
What documents are required for a commercial mortgage application?
You’ll need to provide proof of business trading, financial statements, details of the property, and often a business plan or property investment strategy.
Can I get a commercial mortgage for a buy-to-let property?
Yes, commercial mortgages are available for buy-to-let properties, but terms and conditions may differ from owner-occupied property mortgages. Click here to find out more about Buy-to-Let Limited Company loans.
What fees are involved in commercial mortgages?
Fees may include arrangement fees, valuation fees, legal fees, and possibly broker fees. These vary by lender and mortgage type.
How does a lender assess a commercial mortgage application?
Lenders assess applications based on the value of the property, the business’s ability to repay the loan, credit history, and the viability of the business plan or rental income potential.
Get a commercial mortgage
Limited companies can receive a loan decision without impacting their credit score. This allows you to evaluate your options without worry.
