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A commercial mortgage is your business’s trusted ally, firmly secured by your commercial property. It’s not a one-size-fits-all deal; it’s a solution tailored to your budget, property, and business needs. Finding the best rates, and an ideal lender is a journey that’s made easy with the guidance of a dedicated commercial mortgage team at Monefi. Book your free consultation today!
When do you need a Commercial Mortgage?
Commercial mortgages come into play when your business requires funding beyond traditional loans. These loans allow you to borrow substantial amounts, starting from £25,000, with your business property serving as collateral. Spanning 3 to 25 years, a commercial mortgage provides the flexibility your business needs.
The Basics:
Lenders typically require an initial deposit, ranging from 25% to 50%. Your loan-to-value (LTV) ratio, the maximum you can borrow, usually caps at 75% of your business property’s value. For instance, if your commercial property is valued at £300,000, your maximum LTV is £225,000. This means you’d need a deposit ranging from £56,250 to £112,500.
Types of Commercial Mortgages:
There exist two primary categories of commercial mortgages:
Owner-Occupied Mortgage
This variant is designed for the acquisition of property intended for your business operations. It can be used to purchase your current business premises or secure new property for your operations.
Commercial Investment Mortgage
If your goal is to invest in property, such as for rental purposes, this mortgage comes into play. In the case of residential properties, a buy-to-let commercial mortgage is required. It's also suitable for semi-commercial properties with mixed commercial and residential use, such as a storefront with residential flats above it.
Expert's tip on selecting the right Commercial Mortgage:
The choice between these mortgage types depends on factors like your financial plan, the property in question, and the nature of your business. Lenders specialise in serving various business types, so exploring available options is essential. Monefi’s specialist mortgage experts can simplify this process. Leveraging on their expertise, you can identify the highest loan-to-value ratio, necessary documentation, and streamline the application process.
The benefits of taking out a commercial mortgage:
Smart Investment
Commercial mortgage repayments often mirror rental costs for the same property. However, with a mortgage, your payments go towards building equity, turning your money into a valuable investment.
Tax Advantages
The interest paid on your commercial mortgage is tax-deductible, offering your business an opportunity to lower its annual tax burdens and boost financial efficiency.
Competitive Rates:
Commercial mortgages typically have more attractive interest rates compared to other business loan options, allowing you to save on borrowing costs.
Capital Growth:
As your property’s value appreciates, you stand to gain a substantial lump sum when you decide to sell. It’s a potential windfall for your business.
Rent-Free Future:
Owning your premises eliminates the need for rent payments and shields you from the uncertainties of rent increases. Moreover, you have the option to generate income by leasing out your business space or land.
Smart Investment
Commercial mortgage repayments often mirror rental costs for the same property. However, with a mortgage, your payments go towards building equity, turning your money into a valuable investment.
Tax Advantages
The interest paid on your commercial mortgage is tax-deductible, offering your business an opportunity to lower its annual tax burdens and boost financial efficiency.
Competitive Rates:
Commercial mortgages typically have more attractive interest rates compared to other business loan options, allowing you to save on borrowing costs.
Capital Growth:
As your property’s value appreciates, you stand to gain a substantial lump sum when you decide to sell. It’s a potential windfall for your business.
Rent-Free Future:
Owning your premises eliminates the need for rent payments and shields you from the uncertainties of rent increases. Moreover, you have the option to generate income by leasing out your business space or land.
What fees are involved?
When securing a commercial mortgage, it’s essential to be aware of associated fees:
Arrangement Fee
This fee covers the loan’s arrangement. Typically ranging from 0.75% to 2% of the loan amount, it can often be added to your mortgage. Keep in mind that adding it to your mortgage means you’ll pay interest on this amount throughout the mortgage term. Speak to our mortgage expert before you opt in to avoid overpaying.
Valuation Fee
This fee covers the cost of a property valuation by an appraiser appointed by the lender. Valuation fees for commercial properties are often higher than those for residential properties. This is because the valuation expert considers factors such as rental yield and marketability.
Legal Fees
Legal fees can vary widely based on your choice of solicitor, costs usually begin at a few hundred pounds.
Broker Fees
Engaging a specialised commercial mortgage broker can enhance your chances of securing the best deal and increase the likelihood of your application being accepted. Broker fees typically amount to up to 1% of the loan’s value.
Arrangement Fee
This fee covers the loan’s arrangement. Typically ranging from 0.75% to 2% of the loan amount, it can often be added to your mortgage. Keep in mind that adding it to your mortgage means you’ll pay interest on this amount throughout the mortgage term. Speak to our mortgage expert before you opt in to avoid overpaying.
Valuation Fee
This fee covers the cost of a property valuation by an appraiser appointed by the lender. Valuation fees for commercial properties are often higher than those for residential properties. This is because the valuation expert considers factors such as rental yield and marketability.
Legal Fees
Legal fees can vary widely based on your choice of solicitor, costs usually begin at a few hundred pounds.
Broker Fees
Engaging a specialised commercial mortgage broker can enhance your chances of securing the best deal and increase the likelihood of your application being accepted. Broker fees typically amount to up to 1% of the loan’s value.
The lady who I spoke to was brilliant. She was lovely and pleasant whilst being professional and fully informative. She was not pushy at all. She certainly had the right attitude and was engaging. If everyone was like her it would be perfect.
Christine Notley
This was the easiest transaction I’ve had in a long time, the customer service was amazing and very helpful and nice to talk with, would highly recommend the company to friends family etc, fantastic customer service. 5 stars from me.
Zoe Mary Hall
Mr Gower was very professional and found the right cover for me. He was polite and engaged in conversation, explained everything easily.
Callum Dobson
Frequently Asked Questions
The down payment for a commercial mortgage typically falls in the range of 20% to 40% of the property’s value. However, the exact amount can vary based on factors like the lender’s policies, your financial situation, and the type of property you’re purchasing.
Eligibility criteria for a commercial mortgage often include factors like creditworthiness, business viability, deposit amount, business plan, property type, loan purpose, repayment source, legal structure of your business, your experience, age, and the condition and value of the property.
Book a free consultation call with us to learn about your eligibility!
A commercial mortgage can be a game-changer for your business, offering versatile options such as:
- Property acquisition
- Purchasing an existing business
- Releasing capital for investment
- Property development
- Investment in properties for leasing
- Revamping your business premises
- Acquiring vehicles, machinery, and equipment
- Harness the power of a commercial mortgage to elevate your business to new heights
How much is the down payment for a Commercial Mortgage?
The down payment for a commercial mortgage typically falls in the range of 20% to 40% of the property’s value. However, the exact amount can vary based on factors like the lender’s policies, your financial situation, and the type of property you’re purchasing.
What is the eligibility criteria for a Commercial Mortgage?
Eligibility criteria for a commercial mortgage often include factors like creditworthiness, business viability, deposit amount, business plan, property type, loan purpose, repayment source, legal structure of your business, your experience, age, and the condition and value of the property.
Book a free consultation call with us to learn about your eligibility!
Can I leverage a Commercial Mortgage for business growth?
A commercial mortgage can be a game-changer for your business, offering versatile options such as:
- Property acquisition
- Purchasing an existing business
- Releasing capital for investment
- Property development
- Investment in properties for leasing
- Revamping your business premises
- Acquiring vehicles, machinery, and equipment
- Harness the power of a commercial mortgage to elevate your business to new heights
