Commercial Mortgages
Funding That Fits Your Needs!
If you're thinking about purchasing property for your business—whether to expand your existing operations or lease it to other businesses—a commercial mortgage might be the solution you need.
• Access a wide range of lenders and interest rates.
• Check your eligibility quickly and easily.
• Discover how much you could borrow.
For many growing businesses, securing a new premises is a key step. Whether you're looking to establish a permanent location or simply need more space for growth, commercial property financing can provide the support you need.
Read on to learn more about the different types of commercial mortgages available to help you grow your business.
How does a commercial mortgage work?
Find the Right Funding Partner
What is a Commercial Mortgage?
A commercial mortgage is a loan that is secured against non-residential property. It can be used to purchase a building for your business operations or to lease to other businesses. You can also use this type of mortgage for property development, acquiring equipment, or purchasing vehicles.
Unlike residential mortgages, commercial mortgages are not regulated by the Financial Conduct Authority (FCA), and as such, they often come with higher interest rates.
How Do Commercial Mortgages Work?
Similar to a residential mortgage, a commercial mortgage is secured against the value of the property you're purchasing. The loan-to-value (LTV) ratio for commercial mortgages can go up to 75%, meaning a deposit of at least 25% is usually required. However, some lenders may accept alternative forms of collateral, such as equity from other properties or charges on assets like insurance policies or shares.
Commercial mortgages typically have terms of up to 30 years and can be used for both freehold and leasehold properties. Leasehold properties generally require the lease to be longer than 70 years, and additional security may be needed.
Types of Commercial Mortgages Available
There are several types of commercial mortgages depending on the purpose of the loan:
Owner-Occupied Mortgages These are ideal if you're purchasing or refinancing the property you plan to use for your business. You can apply for this as a business or as a business owner. If you are a small business ready to open a physical storefront, this could be the right option for you.
Commercial Buy-to-Let Mortgages If you're looking to purchase a commercial property to rent out to other businesses, such as office spaces or retail locations, this mortgage is a good fit. Lenders may require you to meet higher criteria as renting out commercial properties can sometimes be more challenging than residential rentals.
Residential Buy-to-Let Mortgages This mortgage type is for those interested in purchasing properties to rent them out to residential tenants. This is typically used by professional landlords or buy-to-let companies.
Types of Commercial Mortgage Lenders
There are different types of lenders you can approach depending on the specific requirements of your business:
High Street Banks Well-established banks tend to offer lower interest rates and larger loan amounts. However, their application processes can be lengthy, and they may have stricter requirements, especially if you have poor credit.
Challenger Banks These banks are more likely to approve loans for businesses with bad credit and tend to have more competitive rates. They also offer a more streamlined and user-friendly service, leveraging technology to improve the customer experience.
Alternative Finance Providers These lenders are often more flexible and willing to lend to newer companies. They may have fewer requirements but could come with higher rates and longer loan terms. For instance, alternative finance providers may lend on properties located outside the UK or in non-traditional locations.
Each lender has its own criteria, and comparing offers across multiple providers is essential to finding the best deal.
Key Benefits of Commercial Mortgages
• Longer Borrowing Terms: With terms up to 25 years, you can lower your monthly repayments and free up cash for your business.
• Lower Interest Rates: As secured loans, commercial mortgages tend to offer better interest rates and higher loan amounts than unsecured loans. Plus, interest payments may be tax-deductible.
• Renting Potential: You may be able to generate additional income by renting part of the property to other businesses.
• Business Stability: Owning the property ensures you're not at the mercy of rent hikes or landlords selling the property, giving your business more stability.
How to Apply for a Commercial Mortgage:
Working with a financial broker can simplify the process of comparing different commercial mortgage options. Once you've chosen the right provider, follow these steps:
1 Fill out the asset and liability form online.
2 Submit the commercial mortgage application, including your business details.
3 The lender will conduct a property valuation.
4 A solicitor will handle the legal due diligence.
5 If approved, you'll receive a formal mortgage offer.
If you're interested in finding out more about your eligibility for a commercial mortgage, APPLY NOW to explore your options for free.
Important Reminder: Think carefully before securing debts against your commercial property. Failure to meet repayment terms could result in the repossession of your property.
