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Commercial Mortgages

Are you a business owner seeking to establish a commercial property for start-up or expansion? If so, you might be looking to secure a commercial loan or business mortgage for the property you’re eyeing. Commercial mortgages usually have higher interest rates than residential mortgages, and interest rates can vary per lender, bank, or commercial mortgage provider. Commercial mortgages may also be subject to additional costs like legal and valuation fees.

While several conditions come with commercial mortgage approval, our team of mortgage experts is here to guide you throughout the process and help you secure a loan you need for the business premises in no time.

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What type of properties can a business owner acquire with a commercial mortgage?

By getting approved for a commercial mortgage, one can remortgage or acquire a building or property for business or commercial use. 

Here are some types of properties you can acquire through a commercial mortgage can be any of the following: 

  • Commercial complex
  • Industrial facilities
  • Office space or building
  • Retail space
  • Warehouse
  • Factories
  • A piece of land

 

Apart from using a commercial mortgage to finance a property for business use, a commercial mortgage loan can be used to develop an existing commercial property or building. 

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What are the advantages of getting a commercial mortgage?

When you get a commercial mortgage with the intention to build or refurbish a commercial property, this can provide several advantages including the following:

 

1. Additional revenue opportunities

Apart from expanding or starting a business, acquiring a business property through a commercial mortgage can be an opportunity for a new business venture. You may also open a portion of your new property for lease while operating your business as usual.

In the future, you may also choose to rent out your property in case your business fails, or you plan to retire operations. Furthermore, commercial property is an asset that can potentially increase in value after years. 

 

2. Avoid the risks, restrictions, and increased costs that come with renting

Renting a commercial space or building for your business is constraining and risky. There could be restrictions that you have to comply with that may involve storage capacity or sanitary restrictions. Such factors can prevent your business from operating freely. You also have to worry about the risk of eviction from time to time.

Aside from the factors mentioned, there’s also the disadvantage of paying utility bills, service charges, and repair costs. Plus, the increasing rental costs can threaten your business’ revenue in the long run. 

That said, if you have a growing business or are planning to expand, securing a property through a commercial mortgage can be more beneficial and cost-effective long term. 

 

3. You can borrow enough amount to support your business

Starting or expanding your business entails higher costs that can be troublesome. The good news is there’s no need to despair if you don’t have enough capital to fund your business venture. Some commercial mortgage lenders can offer borrowers 65% or more of the possible amount of the property value. 

 

4. Flexible repayment 

With the help of a commercial mortgage, your dream of getting your own commercial space is at the tip of your fingers. 

Depending on lending entities and the borrower’s financial standing, flexible repayment terms can last for more than 20 years. This term spares business owners the pressure of paying a large sum of money within a short period.

Because of this perk, business owners can concentrate on business growth.

 

5. Allows businesses to achieve control and stability

Having your own commercial space gives you a sense of security since you don’t need to think about lease renewals and other downsides that come with renting a commercial space. 

At the same time, you have more control over business operations and can focus on expansion. 

 

6. Some commercial mortgages can be eligible for tax deductions

A secure business loan can make you eligible for tax deductions as they count as business expenditures. However, the tax deduction is only applicable to the interest rate.

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When you think you’ve hit that brick wall and have all but given up hope of finding mortgage finance, When the Bank Says No are here to turn your ‘No’ into a ‘Yes’. We have access to a range of specialist lenders who are willing to help those that the High Street banks just won’t touch. Get in touch today and see how we can turn your dreams into a reality.

What are the disadvantages of getting a commercial mortgage?

Despite the enticing benefits of applying for a commercial mortgage, there can be several downsides, including:

 

1. Higher interest rates

Due to the increased risk, it presents to banks and lenders, the interest rate of a commercial mortgage is usually higher than residential mortgages to guarantee a return on investment on the lender’s side.

Since a commercial property has a higher turnover rate and is vulnerable to economic fluctuations, lenders increase the interest rate to compensate for the risk. Another reason is that commercial properties may need more maintenance and upkeep.

 

2. Requires deposit

Compared to residential mortgages, a commercial mortgage requires a larger deposit to serve as a guarantee, given the massive risk it entails.

 

3. Loan approval may take long

Depending on the lender’s conditions and the borrower’s financial capacity, approval for a commercial mortgage may take up to two months.

Given that fact, loan approval can be a painstaking process, especially for first-time applicants. But did you know there’s a way to increase your chances for approval?

Our dedicated experts at When The Bank Says No understand that your time is precious. We can help assess your circumstances and determine the best options for you!

That way, we can help lessen the turnaround time and save you the hassle of the lengthy loan approval process.

Frequently Asked Questions

What documents do you need for a commercial mortgage application?

To support your application for a commercial mortgage, your lender may require you to submit supporting documents like the following:

  • Application form
  • Proof of identity of both the borrower and the business entity
  • Tax returns
  • Business plans
  • Property valuations
  • Financial statements
  • Personal and business bank statements
  • Statement of assets and liabilities

The documents will guide the lenders in assessing the borrower’s capacity to pay for the loan, so all documents must be up-to-date and certified. 

Note that requirements may vary for every lender, and some may ask for additional documents to secure your approval. 

Apart from documents, lenders offering commercial mortgages may also require collaterals or personal guarantees prior to approval.

Our specialists at When The Bank Says No will explore the best route for you and guide you in accomplishing all the necessary documents to increase your chances of getting your loan. 

Aside from meeting the minimum requirements, having a solid financial stature, and presenting a valid business plan, choosing the right lender will increase your chances for loan approval. 

By choosing our friendly brokers that connect you to reputable lenders compatible with you and your business’s current financial standing, you don’t need to worry about loan declines and long-term risks!

Yes! We understand that applying for a commercial mortgage is a tedious and sometimes stressful process. 

As professionals with personal life and business to take care of, you can achieve that balance by allowing a specialist commercial mortgage broker from When the Banks Says No to help you through the following:

  1. Walk you through the application process
  2. Help you accomplish the proper documents for approval
  3. Match you to reputable lenders according to your needs
  4. Negotiate with lenders on your behalf
  5. Help you find the best deals that align with your financial goals
  6. Long-term support that values you and your business

All these perks are for a reasonable service fee, so don’t hesitate to contact us today!

The repayment terms may vary depending on the loan product and the lenders’ terms and conditions. Usually, repayment terms can be between 3 to 25 years, with some lenders giving up to 30-40 years of the repayment period.

One of the disadvantages of commercial mortgages is their high deposit. According to Finder, commercial mortgage deposits can be as low as 25% of the property value. 

The computation of the deposit amount depends on the lender’s loan-to-value or LTV ratio, property type, credit history, and other factors.

The LTV ratio measures the mortgage amount against the property’s appraisal value, which means the lower the loan-to-value LTV ratio, the higher the deposit you’ll have to pay.

For example, a £300,000 property with a 25% LTV ratio will require a £75,000 deposit.

Meanwhile, low-risk businesses that offer essential supplies and services (like greengrocers and meat shops) will require a lower deposit.

The difference between commercial and semi-commercial mortgages is that semi-commercial mortgages involve a loan secured on properties with both commercial and non-commercial components.

There are no standard interest rates for commercial mortgages, and the calculations are unique for every lender, taking into account the borrower’s credit history, the property’s purchase price, and other factors like:

  • The size of the loan
  • LTV ratio
  • The business’ financial status

Moreover, interest rates for commercial investment mortgages can either be fixed or variable. Thankfully, much like is the case with a residential mortgage, we can contact various lenders on your behalf and check with available loan products and interest rates that match your current financial standing. 

Yes, some commercial mortgage lenders may offer zero-deposit options, especially forhigh-risk industries and entities that can offer collaterals. However, the interest rate is usually higher and more risky. 

Apart from the deposit fee, you may need to pay other fees like the following:

  • Origination or arrangement fees
  • Property valuation fees
  • Legal fees
  • Broker fees
  • Security fees

One of the most significant risks of taking out a commercial mortgage on business premises is the possibility of repossession or default if repayment isn’t consistent. 

Defaults can happen due to interest rate fluctuations and market or economic conditions that cause your business revenue to decline. In effect, you may not be able to keep up with repayments.

Thus, it’s essential for most commercial mortgages to partner with expert brokers to help assess your financial standing and compatibility for long-term conditions.

Remortgaging or refinancing is applying for a new mortgage for your current commercial mortgage. You can opt for refinancing to develop your current commercial property.

How to apply for a commercial mortgage?

To apply for a commercial mortgage, the borrower must secure a loan proposal, accomplish a commercial mortgage application form, and submit all necessary documents that the lender requires. 

That said, a reputable broker can help negotiate your application on your behalf. As experienced brokers, we can advise you on developing business plans to convince lenders and guide you in formulating your loan proposal or properly filling out forms to increase your chances to secure your loan. 

Moreover, our experts at When The Bank Says No will educate you about the risks and benefits of getting a loan for your commercial property, so you can be confident that you’ll get the best offer!

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