Whether you are looking to upgrade your current premises, open up in a new location, or release some capital from a property you already own, having access to a commercial mortgage could be integral to the growth of your company.
Essentially, a commercial mortgage is a loan secured on a property which is not your primary residential address. A commercial mortgage can be taken out on various types of property, including office buildings, industrial warehouses, or retail premises. Property is often a company’s biggest asset and can, therefore, be an ideal source of funding.
The premise of a commercial mortgage is the same as for a residential property, although interest rates are typically slightly higher. As well as interest on the loan, there will be further costs such as valuation fees, mortgage product fees, and also legal costs.
Commercial mortgages are offered by well-known high street lenders as well as those who specialise solely in commercial property loans, so it’s worth shopping around to ensure you get the best deal for you and your business.
Commercial mortgages come in a variety of types, depending on how the property being purchased will be used. The three main types are as follows:
These mortgages can be taken out if the property being purchased is to be used by the company buying it. This may be new premises the company will relocate to, or the company may be purchasing the premises it currently operates from.
This is for a property which is being purchased by a professional landlord or a buy-to-let limited company in order to be rented out to a residential tenant.
If a property is being purchased to be let out to another business, then a commercial buy-to-let mortgage will be needed. While the premise of the loan is similar to a residential buy-to-let, finding tenants for commercial property is seen as more difficult and, therefore, the lender may see this as a greater risk, making obtaining a loan more difficult. You may be required to put down a large deposit and demonstrate that you will be able to maintain the monthly mortgage payments should your property not be tenanted at any point. If you already have a long-standing tenant in place, you find it significantly easier to obtain such a loan.