Business Mortgage Finance
Commercial mortgages describe the loan secured on a building which you are not using as a house or home. Alternatively named ‘business mortgages’, they are designed for business owners who want to purchase property or land for commercial use.
There are many types of commercial finance on offer and the most appropriate option will vary depending on the needs of each business. For those who are investing in a non-residential property, commercial mortgage finance is likely to be the best way forward.
Commercial mortgage finance is designed specifically for businesses looking to invest in property such as office buildings, shopping complexes or industrial units. The main benefits of this type of finance are:
- interest payments are tax-deductible
- when the property value increases so does the capital
- the property can be sublet to generate extra income
Search commercial finance from 100s of products
Due to the more involved nature of operating commercial premises, lenders prefer applicants to have property investment experience. To increase your chances of securing the right finance, in most cases you’ll need:
- a deposit of 20% – 30%
- to be a homeowner
- to have owned a couple of Buy to Let properties for a minimum of two years
- cash in the bank in the form of savings
- evidence of your income
As commercial mortgage rates are calculated for each specific customer, the rate you’ll get will depend on a combination of factors such as your experience, industry sector, the type of property you want to buy, the quality of the tenant and the length of the lease.
Get Your Commercial Mortgage Right First Time
Commercial mortgage finance is quite complex so it pays to get professional advice before making a final decision. As an independent commercial finance broker, our team at Vincent Burch Mortgage Services can offer help with any type of commercial finance. We’ll work closely with you to complete an application that’s right first time and you’ll benefit from our access to a wide range of lenders and competitive rates from right across the market.
When are commercial mortgages used?
Commercial mortgages take over from where business loans can no longer be used – with a business loan, you can receive up to £25,000 unsecured, but for amounts larger than this your lender will want security in order to reduce the risk to themselves.
A commercial mortgage spans from 3 to 25 years, with a 75% LTV (Loan to Value).
What are the key features of a commercial mortgage?
Your business mortgage will differ from a traditional residential mortgage as there are no fixed rates, and you’ll usually pay a higher interest rate.
What fees will I pay on a business mortgage?
Typically you will pay arrangement, valuation, legal, and broker fees.
Arrangement fees are added to the loan after approval, and these are usually 1%-2% of the loan for loans up to £1 million. Valuation fees start at around £500 for a simple case, and fees are based on bespoke quotation payable to the lender after an initial indicative offer has been approved.
Legal fees cover both your own legal fees and the lenders, which can start at around £500 for each.
How do I qualify for a business mortgage?
In order to qualify for this type of mortgage, you will need to pass eligibility checks which typically include:
- Business cash flow, and debt checks to assess the overall financial health of your company
- Projected income, to determine affordability
- Your likelihood to be able to pay the deposit, which can range from 20%-40% of the loan
- Rental income can sometimes be taken into consideration, as this will have a knock on effect on your businesses cash flow
- General income, credit and assets
Get in touch, and we can help support you through the process.
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