Table of Contents
What is a commercial mortgage in the UK
A commercial mortgage is a type of loan that is used to purchase or remortgage a commercial property, such as an office building, warehouse, or retail space.
Commercial mortgages are generally used by businesses to acquire new properties or to remortgage existing ones for the purpose of expanding their operations or improving the terms of their current mortgage.
In the UK, commercial mortgages are typically offered by banks, building societies, and other financial institutions. They are typically secured against the property being purchased or remortgaged, meaning that the lender can repossess the property if the borrower defaults on the mortgage.
What do i need a commercial mortgage for?
There are a number of reasons why a business might choose to take out a commercial mortgage:
To purchase a new commercial property: If a business is looking to expand its operations or relocate to a new location, it may need to purchase a new commercial property.
To remortgage an existing commercial property: If a business already owns a commercial property and is looking to improve the terms of its mortgage.
To raise capital for other business purposes: In some cases, a business may take out a commercial mortgage and use the proceeds to fund other business activities, such as hiring new employees or expanding into new markets.
To purchase equipment or machinery: Some commercial mortgages can be used to purchase equipment or machinery that a business needs to operate.
Overall, a commercial mortgage can be a useful tool for businesses that need to acquire or improve commercial properties or raise capital for other business purposes.
Do you need finance for your property portfolio?
Or call and speak to one of our specialist brokers on 0800 316 2224
Mortgage calculator
Do you want a guide to see how much your payments would be when borrowing for a property.
Our calcualtor covers bridge, residential, refurbishment and commercial.
How do I get a commercial mortgage?
To get a commercial mortgage, you will typically need to follow these steps:
Determine your borrowing needs: The first step in getting a commercial mortgage is to determine how much you need to borrow and for what purpose. This will help you identify the type of mortgage that is most suitable for your needs.
Determine your eligibility: Most lenders have specific eligibility requirements for commercial mortgages, such as minimum credit scores, debt-to-income ratios, and minimum deposits. You will need to review these requirements to determine whether you are eligible for a commercial mortgage.
Shop around for the best mortgage: Once you have determined your eligibility, you should shop around to find the best mortgage for your needs. This may involve comparing rates and terms from multiple lenders, including banks, building societies, and other financial institutions.
Gather the necessary documentation: To apply for a commercial mortgage, you will typically need to provide a variety of documentation, such as financial statements, tax returns, and proof of income. You should gather all of the necessary documentation before you begin the application process.
Apply for the mortgage: Once you have found a lender and gathered the necessary documentation, you can apply for the mortgage. The lender will review your application and, if approved, will provide you with a loan offer that outlines the terms and conditions of the mortgage.
Review and negotiate the mortgage offer: Once you receive a mortgage offer, you should carefully review the terms and conditions to ensure that they are favourable. If you have any questions or concerns, you should ask the lender to clarify them. You may also want to negotiate the terms of the loan, such as the interest rate or repayment period, to get the best deal possible.
Funds release: Once you have accepted the mortgage offer and all of the necessary paperwork has been completed, you will be ready to have the funds released. This typically involves signing a number of documents and paying any final costs. After the funds have been released, you will be responsible for making regular mortgage payments to the lender.
How much can I borrow for a commercial mortgage?
The amount that you can borrow for a commercial mortgage will depend on a number of factors, including:
The value of the property: Most lenders will only lend up to a certain percentage of the value of the property being purchased or remortgaged. This percentage, known as the loan-to-value (LTV) ratio, can vary depending on the lender and the specific circumstances of the borrower.
Your creditworthiness: Lenders will typically consider your credit score and credit history when determining how much to lend you for a commercial mortgage. Borrowers with good credit may be able to borrow more than those with poor credit.
Your debt-to-income ratio: Your debt-to-income ratio is a measure of how much of your income is being used to pay off debt. Lenders will typically consider this ratio when determining how much to lend you for a commercial mortgage.
Your business’s financials: Most lenders will also consider your business’s financial health when deciding how much to lend you for a commercial mortgage. This may include reviewing your business’s income and expenses, as well as its assets and liabilities.
Overall, the amount that you can borrow for a commercial mortgage will depend on a variety of factors, and it is ultimately up to the lender to decide how much to lend you based on their assessment of your creditworthiness and the risk involved in lending to you.
What does a commercial mortgage broker do?
What does a commercial mortgage broker do?
A commercial mortgage broker is a professional who helps businesses secure mortgages for commercial projects. They work with a variety of lenders to find the best mortgage products for their clients and help their clients navigate the mortgage application process.
Some of the specific duties of a commercial mortgage broker may include:
Assessing the borrowing needs of their clients: A commercial mortgage broker will work with their clients to determine how much they need to borrow and for what purpose.
Identifying suitable lenders: Once the borrowing needs of their clients have been determined, a commercial mortgage broker will identify lenders that are likely to offer suitable mortgage products.
Gathering and reviewing documentation: A commercial mortgage broker will typically help their clients gather and review the necessary documentation, such as financial statements, tax returns, and proof of income, to apply for a commercial mortgage.
Submitting mortgage applications: Once all of the necessary documentation has been gathered, a commercial mortgage broker will submit the mortgage application on behalf of their client to the lender.
Negotiating mortgage terms: If a lender offers a mortgage to a client, a commercial mortgage broker will work with the lender to negotiate the terms of the mortgage, such as the interest rate and repayment period, to get the best deal for their client.
Managing the completion process: Once a mortgage has been approved, a commercial mortgage broker will help their client navigate the completion process, including reviewing and signing the necessary documents and paying any final costs.
Overall, a commercial mortgage broker can be a valuable resource for businesses seeking mortgages for commercial projects, as they can help their clients find the best mortgage products and guide them through the mortgage application process.
Do you need finance for your property portfolio?
Or call and speak to one of our specialist brokers on 0800 316 2224
What is the difference between a Commercial Mortgage and a home buyer’s mortgage?
There are several key differences between a commercial mortgage and a homebuyer’s mortgage:
Property type: A commercial mortgage is used to finance the purchase or remortgage of a commercial property, such as an office building, warehouse, or retail space. A homebuyer’s mortgage, on the other hand, is used to purchase or remortgage of a residential property, such as a house or apartment.
Borrower: Commercial mortgages are typically taken out by businesses, while homebuyer mortgages are taken out by individuals or families.
Purpose: Commercial mortgages are generally used to fund business activities, such as purchasing or improving commercial properties or raising capital for other business purposes. Homebuyer mortgages, on the other hand, are used to purchase or remortgage a primary residence.
Security: Both commercial mortgages and homebuyer mortgages are typically secured loans, meaning that they are backed by security. For a commercial mortgage, the security is typically the commercial property being purchased or refinanced. For a homebuyer mortgage, the security is typically the residential property being purchased.
Overall, the main difference between a commercial mortgage and a homebuyer mortgage is the type of property and purpose of the mortgage. Commercial mortgages are used to purchase or improve commercial properties and are taken out by businesses, while homebuyer mortgages are used to purchase or remortgage a primary residence and are taken out by individuals or families.
What are the Terms and fees with a commercial mortgage?
The terms and fees associated with a commercial mortgage can vary depending on the lender and the specific circumstances of the borrower. Some of the terms and fees that may be associated with a commercial mortgage include:
Interest rate: The interest rate is the percentage charged for borrowing the funds from the lender, this sets the monthly payments. Commercial mortgage interest rates are typically higher than those on homebuyer mortgages, as they are used to finance larger, more complex projects and carry a higher level of risk for the lender.
Repayment period: The repayment period is the length of time over which the borrower is required to pay back the mortgage.
Deposit: A down payment is a percentage of the mortgage amount that the borrower is required to pay upfront. Deposit requirements for commercial mortgages are typically higher than those for homebuyer mortgages.
Completion and legal costs: Completion costs are fees that the borrower is required to pay in order to complete the mortgage transaction and have the funds released. These may include lender fees, appraisal fees, and legal fees, among others.
Early repayment penalties: Some commercial mortgages may include an early repayment penalty, which is a fee that the borrower is required to pay if they pay off the mortgage within a set period.
Overall, it is important for borrowers to carefully review the terms and fees associated with a commercial mortgage before agreeing to proceed. This will help them understand their financial obligations and ensure that they are getting the best deal possible.
