Commercial Mortgages and Remortgages
and Semi-Commercial Mortgages and Remortgages
The title commercial mortgage covers a very broad subject. If you are buying a shop to run a business, you will require a commercial mortgage. If you are an investor purchasing a shop to rent it out, you will also require a commercial mortgage. If you are purchasing a property, regardless of whether you are going to run your own business from it or merely purchase the property as investment to rent it, you still need a commercial mortgage.
Commercial mortgages will buy you an industrial building, an office block, development land, a pub or a chain of pubs. You can also use commercial mortgages to buy a business, and as this includes just about every business that exists, you can see that very quickly the subject of commercial mortgages is vast.
We have therefore broken the commercial mortgage enquiry process into 3
- Those enquiries looking to purchase buildings only.
- Those wishing to purchase businesses with or without buildings.
- Those wishing to remortgage or raise capital.
There is no simple answer because it depends very much on what it is you are hoping to achieve. As a general rule, if you are purchasing as an investment, the commercial mortgage lender will be primarily looking at the building you want to purchase and its viability as an investment and the demand for that type of building or accommodation. Whilst the main focus for investment properties is the ability to demonstrate the rental or lease will be adequate to repay the mortgage, the size of, or the cost of the purchase may also encourage the commercial lender to check that the investor has adequate resources to cover periods of low or no occupancy. Clearly there is a significant difference in the risk for the lender of an individual purchasing a pub for £250,000 and an individual or company purchasing an office block for £4,000,000, and again these amounts are diminished by the company or consortium who purchase an old listed warehouse or mill with development potential to convert and build 220 apartments and ground floor retail units.
Another factor which can influence the requirement of accounts is how much deposit you can provide. Again, there is no simple answer; we will always look for the easiest route to proceed. Clearly, if you have accounts then we would certainly use them, if you do not have accounts because it is a new venture, or your business is not old enough to have prepared any accounts, then we will work with what you have got.
However, if you are purchasing a business, or if you are looking for refinance or raise funds to expand your business, this will inevitably require accounts and of course accounts produced by a chartered or certified accountancy firm will have greatest credibility and achieve the lowest interest rate.
Almost inevitably yes. If you are purchasing at a discount some commercial mortgage lenders will accept the discount as part of your deposit, but all commercial lenders like to see the buyer use at least some of their money as deposit, ie 5% with the remainder discounted from the market value. The prospect of purchasing with a Bridging loan and remortgaging immediately onto a commercial loan can be used when purchasing with a large discount off the open market value.
However, if you already own a property or land and you are looking to expand your current business facility or looking for development finance to build or convert, the chances are you will not require any further personal funding.
The short answer is no, for most commercial mortgages 70% - 85% is normal. However, if you have other property with equity available, then a second charge can be taken against the other property or properties which will increase the amount the commercial lender will provide, potentially up to 100% of the purchase price.
We always aim for the lowest interest rate. Low cost commercial mortgages are more likely with bigger deposits and a full set of accounts produced by a chartered or certified accountant. Its about presenting your application in the best possible light, giving confidence to the lender. The better we can present your application, the more chance you have of attracting the lowest possible interest rate. It is impossible to quote an accurate interest rate, but we do give guidelines below. We also have access to the whole market which means which ever commercial lender has the lowest interest rates that suits your needs, we can get it.
Most lenders will allow a period of 2 5 years interest only and then require the loan to change to a repayment mortgage. There are just a couple of lenders who will allow interest only indefinitely on a commercial mortgage.
