A selection of some of the more popular question we get asked.
A commercial mortgage is a large loan secured against a commercial property. Whilst there are similarities to residential mortgages, commercial mortgage proposals are assessed on individual merit and vary from case-to-case. For more information read our commercial mortgage guide.
There are several advantages to owning your business premises including;
Read more about the advantages and disadvantages of buying commercial property.
Commercial mortgages are typically available between £25,000 and £40m based around 75%-85% LTV for owner-occupied mortgages and 65%-75% LTV for investment or buy-to-let mortgages. Higher LTV loans may be available in specialist circumstances but an exact figure can only be determined by assessing the performance of your business so speak to an adviser to get a better idea.
The lender will almost certainly require a deposit in order to proceed with a commercial mortgage, the exact amount will be dependent on a number of factors but as a guide most businesses will need to raise between 65% to 85% of the loan-to-value (The percentage difference of the properties value and the mortgage amount). Your involvement with the property will also influence the LTV as buy-to-let or investment mortgages will require greater deposits. 100% mortgages are extremely rare but can be agreed upon in exceptional cases. As a general rule of thumb the greater your deposit the more favourable your application will be reflected in a lower rate of interest.
Initially, nothing. There's no charge for any initial advice, so in the unlikely event that we can't help there will be no fee.
Following the initial advice some lenders may require an up front payment or 'set-up' fee before taking things further, this is more often the case with riskier applications in order to protect the lender should the mortgage fail to go through.
Once a 'decision in principle' has offered the lender charge a processing or arrangement fee, rates are usually negotiable but tend to between 0.5% and 3% of the loan amount, most lenders will allow this fee to be added to the mortgage. The lender will also charge a valuation fee in order to professionally value the property, fees vary depending on the size of the property and in some instances a full structural survey may be required at your expense.
Should you decide to pay off the mortgage early there may be a redemption charge or early settlement fee, penalties are typically 1%-5% and usually last for 2 to 5 years. For information read our guide on commercial mortgage costs or use our commercial mortgage calculator.
If you have previously been denied a commercial mortgage or think you might be refused due to a poor credit history, we may be able to help, we work with specialist lenders that cater for businesses seeking finance that fall short of the conventional lending criteria. Contact us here for more information.
A decision in principle (DIP) can usually be reached within 48 hours, but completion relies on a number of factors including the size and complexity of the mortgage application as well as the size and location of the property. The average turn around is a few weeks but we have brokered cases with a 10 day completion date.
With limited company applications a directors guarantee is always required but not always from every director, within partnerships each partner is jointly responsible and sole traders bear complete responsibility and liability against defaulted payments.
A commercial mortgage or remortgage can be an efficient means of consolidating any existing debt but is reliant on the income of the business. Contact us here for more information.