If your business is excelling forecasts, sales and customer base is growing, the idea of recruiting more staff is looming and you are thinking of expanding. A commercial mortgage could be next on the agenda.
A commercial mortgage is designed for business owners who wish to buy a commercial property to operate from.
What are commercial mortgages?
A commercial mortgage, sometimes referred to as a business mortgage, is a loan borrowed from a high street bank or a specialist lender to acquire a commercial property.
While you can get a mortgage for both residential and business land and property, there are some differences between the two. For instance, you can only use a commercial mortgage for commercial purposes. Business mortgages also cover investors who may buy properties to rent out to other businesses on a buy to let basis.
Moreover, the interest rate on commercial mortgages is usually variable and deposits tend to be between 25-40% of the property’s value.
Who can get a commercial mortgage?
Any legal operating business can apply for a commercial mortgage. But it is worth remembering that it is a long-term investment, and a general mortgage loan term can range between 3-25 years.
These are the things to consider before making an application:
Choose a lender that is right for you
There are two options when it comes to considering who to borrow from and researching both high street banks and specialist mortgage providers will help you make the right decision for your needs.
The amount you borrow
A general principle is the larger the deposit the less you will need to borrow. However, it is not always that straight forward, with some lenders requiring higher deposits for businesses they consider as high-risk. It is also worth noting that lenders will your look into your personal and business credit history and finances.
Additional costs
These will come in the form of legal fees, valuation fees and not forgetting the arrangement fees and the added lenders administration charge for arranging the loan, which can typically cover between 1-2% of the total loan.
What are the benefits?
Moving away from the fees. A premises dedicated to your brand that you have complete control over is the dream, and there are plenty of benefits that come with it.
No more annual rent increases or paying for windows that never seem to get cleaned but are included in the service charge, and probably the best benefit of all is the potential profit from renting out the space to another business or resale in the future.
If a commercial mortgage is just what you are looking for, get in touch with one of our experts today.
