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.
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.
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:
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
Maximise your chance of approval with specialist advice from an expert in Commercial Mortgages
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:
- 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.
- Requires deposit
Compared to residential mortgages, a commercial mortgage requires a larger deposit to serve as a guarantee, given the massive risk it entails.
- 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.
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!
Commercial Mortgages - FAQs
