Commercial Mortgages

Your Complete Guide

Understanding Commercial Mortgages

There are several types of Commercial Mortgage:

• Investment Commercial Mortgages

• Buy-to-Let

• HMO

• Portfolio Mortgages

• Bad Credit Commercial Mortgages

• Owner Occupier Business Mortgages

A commercial mortgage is a loan used to purchase a building,

development plot, real estate or other non-residential property.

About: Commercial Mortgages

Commercial Mortgages are used to acquire properties such as shops, factories and offices.

In structure they are very similar to residential mortgages. Most lenders will have a

preference as to what type of commercial venture they will lend to – finding these

preferences can take a lot of time and it doesn’t guarantee you the loan.

About: Commercial Investment

Mortgages

Many people now choose to invest their hard-earned cash into property, rather

than relying on fluctuating interest rates for savings. Many choose to do this by

purchasing a commercial property which can then be let out.

Opting for an investment commercial mortgage can ensure you have the

finance in place to grow your nest egg through bricks and mortar.

About: Buy-to-Let and HMO

• Buy-to-Let: This is an increasingly popular loan provided to landlords who buy homes

or commercial buildings which are then leased to tenants. These are available for both

commercial and residential as long as the owner of the property isn’t the main tenant.

• HMO: Similar to Buy-to-Let, but used in buildings that house multiple tenants, such as

student properties or a commercial building with a separate living space. These tend to

be supplied by specialist lenders and can be difficult to find, which is why they are often

found through brokers.

About: Portfolio Mortgages

Used for when there are multiple properties which need to be mortgaged.

Instead of all being under separate mortgages they are held under one, easy-to-

manage portfolio mortgage.

About: Bad Credit Commercial Mortgages

It can be tricky to secure commercial finance if your credit history just isn’t up

to scratch, but a bad credit commercial mortgage can help you get your

investment off the ground. It can be tricky to find a sub-prime lender to meet

your needs, but speaking to a broker can ease the load.

About: Owner Occupier Business Mortgages

This type of commercial finance is suited to business owners who are

purchasing a property so that their business can operate from this location. It

can also be used by those who are looking to remortgage their business

premises.

Are You Eligible for a Commercial Mortgage?

• Similarly to residential mortgages, you’ll need to fit the lender’s criteria for

them to decide whether you are eligible.

• Things that they will look at include:

• Your business’s profit and cost of existing assets

• Your company’s audited/ certified accounts and current management figures

• Business projections and plans to show how capital will be raised

• What type of business will be in the building.

How to Obtain a Commercial Mortgage

There are several ways to go about finding a commercial mortgage. You could:

• Scour the internet for the best deals

• Ask your existing bank

• Use a commercial mortgage broker

There are pros and cons to each service, which will be

covered in the next few slides.

Using the Internet

Pros Cons

Free No guarantees you will be accepted

Huge amount of information included No whole-market comparison

Information tends to be very up to

date

Can’t individually tailor quotes

Very generalized data results

Asking Your Bank

Pros Cons

Existing customers get better rates May not be the best market rate

Bank may pay for certain legal fees High street banks don’t offer every

commercial package

You may have to use their services

which can be more expensive

Using a Broker

Pros Cons

Tailored packages for your needs There is a cost for using their services

Will find the lowest rates available

Have contacts in banks to ensure fast

deals

Saves you tedious leg work

Commercial Mortgage FAQsAll your questions answered!

• Can first time buyers apply for commercial mortgages?

In a word, yes. There are several mortgage options open to first time buyers helping you get your business on the property ladder whether you’ve been at it for 3 years or 30 years!

• Is buying better than renting?

This will depend on your individual situation, but generally speaking, buying is an investment for your business. It will build equity and allow you to make important changes to the business.

FAQs Cont.

• How much deposit do you need?

Every mortgage will require a minimum deposit. This will change from lender to

lender and case to case. However, the more you can put towards a deposit the lower

the interest rates will be.

• What can I do to improve my chances of getting a commercial mortgage?

Targeting the right lenders is a great start. A mortgage broker can help you to pinpoint

which lenders are most likely to accept you and can tailor your application in a way that

is appealing to the lender.

FAQ Cont.

• Can I get a mortgage with a poor credit rating?

Again, this will depend on your situation and the lender. Some lenders charge a higher

interest rate on companies who are considered a risk, while others refuse to lend to

them at all.

• How long does a commercial mortgage take to complete?

This will depend on the lender and how complex the situation is.

Jargon Buster Don’t be confused by estate agents and lenders

• Annual Percentage Rate (APR) – how much the interest on the loan and other charges will be; this is the best way to compare loan offers.

• Early Repayment Charge (ERC) – the amount charged for repaying the loan before a certain period.

• Equity – the difference between the value of the property and loan taken out against it.

• Land Registry Certificate – all details of the property, including the plans.

• Loan to Value (LTV) – size of the mortgage against the price of the property.

• Mortgage Account Fee – the charge for setting up, admin and closing down of the mortgage account.

Getting the Best Rates

• If you want to get the best rates on your commercial mortgage then Pure

Commercial Finance can help. With years of experience under our belts, and

a wealth of industry contacts, we can create the perfect package for your

needs.

• Visit us today at: www.purecommercialfinance.co.uk

Email us on: info@purecommercialfinance.co.uk

Call us on: 02920 676727