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What are commercial mortgages?
Commercial mortgages provide the financial means to purchase industrial and commercial property, from farm land to factories, department stores to office blocks and corner shops to workshops. In some cases, the property will be owner-occupied but others may be tenanted or possibly a combination of both and a commercial mortgage can provide finance however a property is owned.
Generally, the property will be freehold or long leasehold – 50 years or longer – and your loan will be secured against the property. Where loan repayments depend on rental income generated by the property, the level of rental income and the quality of the tenancies will be of paramount importance to your lender.
We can arrange mortgages with the following features:
- Repayment terms of up to 30 years.
- Minimum lending of £25,001 upwards.
- Up to 75% loan to value (up to 100% with additional security)
- Interest rates will vary depending on your circumstances.
- Fixed and variable rates.
- Interest only mortgages.
- Self-certified mortgages.
- Repayment holidays will be available in some cases.
- Suitable for a wide range of property types and industries.
How would a commercial mortgage work for my business?
Commercial mortgages are a great way of purchasing large capital assets, such as property, for your business. Buying a commercial property can be complex but we work with you to find a lender who will be able to offer you the best mortgage and rate for what is such a big and significant purchase for your business.
There will be an assessment of your affordability by the lender and it is likely that you will have to provide security in the form of the property you are borrowing against. In some cases, as much as 100% loan to value mortgage may be available subject to offering additional acceptable security.
Commercial mortgages are suitable for businesses which find themselves needing a property to work from, whether it is a production site, commercial store or office, and they need finance to help them purchase this. We work with a range of lenders on our panel so get in touch with us to find the best deal for you based on your business’ needs.
Different types of commercial mortgages we can offer
We will use our connections and years of experience to put together an application so you have the best possible chance of being accepted and we work hard to ensure you get the most competitive rate on the market. Regardless of your circumstances, there are different types of commercial mortgages available.
- Re-mortgages – Property you already own can be re-financed so if you have land or a commercial building which is either mortgage-free or has a significant amount of equity then restructuring the finance can allow you to release cash into your business. In some cases, a separate loan secured by a second mortgage over the property may be an alternative option.
- Owner-occupied or investment – Commercial mortgages are available to finance owner-occupied premises but if you are in the business of buying and letting commercial property, we can also help. Owner-occupied properties with tenants who provide an additional income stream can also be accommodated.
- Agriculture – Agricultural mortgages can be used to purchase farm land, buildings and related property including equestrian centres, farm shops, kennels, milking parlours etc. Seasonal payments and repayment holidays may be available here as well as fixed or variable interest rates. We can also help you to finance plant, equipment or vehicles through our asset finance options and refinancing is also available.
- Self-certification – If you are self-employed and are unable to prove your income, self-certification facilities are available. They can be used for a wide range of properties including retail and leisure, care and nursing homes, offices, warehouses and a variety of industrial properties. Interest rates on these types of mortgages will vary depending on your circumstances.
- Adverse credit history – Depending on your circumstances, it may still be possible to arrange a commercial mortgage with a history of adverse credit. However, it is more difficult and is generally more expensive. The nature and conditions surrounding the history of your business and its bad debt, the amount of your deposit and your current/future prospects will be taken into account by the lender before a deal is agreed.
Why should I consider a commercial mortgage for my business?
Commercial mortgages are likely to work for your business for many reasons and we will work hard to find you a lender who will be able to offer your business:
- Security –You will be able to negotiate a fixed monthly payment amount with your lender which can help you plan business budgets to manage liabilities and potentially expand. In many cases, your lender will only take the property as security so there may not be a charge over your home.
- Finance –Using a commercial mortgage means that you can obtain the property you need with repayments spread over a manageable, long term. Your interest rates and payments will not usually be fixed, but variable and linked to either bank rate or LIBOR. It is possible to negotiate fixed rates or hedging products to protect your business against interest rate fluctuations. However, there are risks as well as benefits in using these products and we always advise taking specialist advice before committing.
- The ability to obtain the premises you require –Commercial mortgages allow for you to purchase a property to ideally meet the current and future needs of your business. Whether you buy or rent premises is a big decision which should not be rushed into without careful consideration.
- Security of tenure – Owning business premises can provide you with the peace of mind that you will not be removed from or lose the property suddenly which could halt or damage your business in the long run.
- Flexibility – A commercial mortgage can provide you with the means to purchase the property you require to develop your business. Having a valuable, tangible asset combined with a good relationship with your lender, gives you the potential option to renegotiate your mortgage in the future if you want to change the level of your payment, re-mortgage or take out a second mortgage on the business premises.
- The capacity to grow – Depending on the nature of your business and the premises, buying a property with a commercial mortgage may give you the option to extend it as your business grows. This avoids the expense and disruption involved with relocating.
Are there any risks associated with commercial mortgages?
- Upfront cash required –Much like a residential mortgage, you will be required to put down a deposit on the property to secure the facility and it is likely to be a significant amount of money which may prove difficult for some businesses to afford.
- Long repayment terms –Although, long repayment terms can be beneficial to spread the cost of such a big purchase, they can also be a hindrance for some businesses. It is a big commitment to take out a mortgage on a property and repayments will need to be made for many years. If your business outgrows the property it may have to consider selling to relocate (which can be expensive and time consuming) or buying further premises. Operating over a number of sites is usually less efficient and more difficult and expensive to manage.
- If you don’t meet repayments, the business premises could be at risk –If you fall behind on your payments and don’t get in touch with your lender or stop paying your mortgage altogether, you are likely to lose the premises. As a commercial mortgage is a secured lending facility, the lender may take possession and sell the premises in settlement of its debt. Any surplus would be returned to you or handed over to a liquidator should your business fall into insolvency.
So if you are looking to purchase a property for your business or you would like to re-mortgage a current business premises, a commercial mortgage could be the right option for you. Call us now for further information or to get your free, no obligation quote.
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WF Financial Solutions is an independent broker of invoice, asset and trade financing solutions with links to lenders of all sizes and specialties. WF Financial Solutions has helped many clients through a range of lenders and their varying services and we are proud to offer advisory and introductory services to finance providers that suit your needs.
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Different sectors have different needs and we pride ourselves on working hard to understand your situation.
We work closely with banks to secure the right banking facility or commercial mortgage for your business.