If you have ever looked into the world of commercial mortgages, you might well have come away feeling that it is all very confusing. In this article, we are going to take a look at commercial mortgages, helping you to understand what they are and what they’re really about. If you are keen to know more, read on.
What Is A Commercial Mortgage?
Essentially, a commercial mortgage is just like a normal mortgage, except it is to be used in a commercial setting or for a commercial purpose. In most cases, it will be used to buy or to refinance land or property which is to be used as a commercial property. The commercial use itself can vary.
With a commercial mortgage, you are essentially borrowing money against the value of the property or land in question. It can also be used to finance some property development, or to help expand your business in one way or another. As you might imagine, a commercial mortgage can be very helpful indeed, and it is good to know it is an option.
Many people who take out commercial mortgages do so because it is a way to borrow more money than is generally allowed with a commercial loan. Commercial loans are capped at £25,000 in the UK, and generally only offered on an unsecured basis. Whereas with a commercial mortgage, you can borrow more money, and on a secured basis, which is better for the future of your business.
If you are thinking about buying some business premises or trying to get hold of some land for some kind of development, then a commercial mortgage could be the way to achieve those things. You might even be trying to expand your buy-to-let portfolio, or even buy a business outright. Finally, it could be that you are hoping to raise capital on commercial premises you already own. In all of these cases and more, a commercial mortgage is likely going to be key to its being possible.
How Does A Commercial Mortgage Work?
Now that you know what a commercial mortgage actually is, you are probably wondering how it works. The more you know about the details of this, the more prepared you will be going in, and that is always going to be of huge benefit. So how does a commercial mortgage actually work? It’s pretty straightforward in many ways.
Commercial mortgage terms usually last up to 25 years, although of course that can vary considerably based on the amount of money being borrowed and a range of other factors.
The majority of lenders allow for you to borrow up to a total of 70% of the value of the property, or whatever it is that you are thinking about buying or developing. Your business has to repay the mortgage in regular instalments, normally monthly as with a regular mortgage.
Also similar to a normal mortgage, commercial mortgages require that you are able to put down a deposit before you can get it. Alternatively, you can use existing property that you already own as security against the mortgage, if you hold enough equity in it for that to be plausible. How much you borrow is then offset against the deposit that you are able to put down, and you then know how much you are going to pay off each month.
Sometimes, you will have a mortgage offered on an interest-only basis, which means that you only need to pay the interest each month. However, you will still have to pay off the balance at the end of the term period. The very shortest term available is normally three years, and they can go anywhere up to around 40 in rare cases. However, most last around 15-30, with 25 years being the most common and standard term length.
How Do You Arrange A Commercial Mortgage?
The most important step is to ensure you get hold of a specialist commercial mortgage broker. With their help, you will find that every aspect of the process is considerably easier and less stressful – and you will be offered a much wider range of mortgages to choose from, too.
The mortgage broker will need some information from you, including bank statements, trading figures for the past three years or so, proof of identity and address, lease information, and sometimes projections for the future finances of the business. Then it’s just a case of finding the right mortgage and signing on the dotted line.
Using a commercial mortgage broker is absolutely the best way to ensure that you are applying for the mortgage safely and that you have the best chance of success. You are going to be limited in the rates you can get if you don’t do it through a mortgage broker, and finding a specialist mortgage broker is definitely the way to go.
With that in mind, if you are thinking about getting a commercial mortgage and you want the help of a specialist mortgage broker, don’t hesitate to get in touch with us today.
You will find that we are able to make the whole process so much easier and remove many of the associated headaches that normally go along with trying to secure this type of borrowing. With our help, getting a hold of the right commercial mortgage is a walk in the park, and you can carry on looking after your business.
Any Commercial Mortgage enquiries are not provided through CS Mortgage Solutions. They are referred to Fiducia which is authorised and regulated by the Financial Conduct Authority.