Commercial Mortgage

What is a commercial mortgage?

A commercial mortgage is a loan secured to a property owned by a commercial entity.

 For smaller borrowing amounts, an unsecured loan is more applicable; however, for more significant finance, the funding will need security to reduce the risk for the lender. 

Our team have helped many people like you to secure the best rates possible on their commercial mortgage.

If you're ready to get started, complete our simple form today and one of our advisors will be in touch. Carry on reading to learn more!

What are the features of a commercial mortgage?

• You can expect to see higher interest rates on a commercial mortgage than a residential mortgage. 
• Interest rates will be lower than an unsecured loan. 
• There are no fixed rates for commercial mortgages - they are bespoke to the borrowing entity. 
• Business mortgages typically have a term of between three to twenty-five years.
• Loan to value is in the region of 70 to 75%. 
• You are likely to require a larger deposit than for a residential mortgage.
• If you have bad credit, your lender will increase the interest rate to compensate for the additional risk.  
• You can expect to pay more in the way of fees for a commercial mortgage. 

What are the benefits of a commercial mortgage?

• The mortgage interest is tax-deductible. 
• If the property value increases, so will your capital.
• You may be able to rent out the property to generate additional income. 

Trading Company or Special Purpose Vehicle (SPV)?

Many companies consider getting a mortgage to buy property, and while property ownership is not their core business, it is possible to do this as a trading company.

If a trading company wants a mortgage, the lender will base their decision-making on the financial performance of the company. This will involve analysis of financial documents produced by the company to determine the likelihood of being able to meet mortgage obligations long-term.  

You may consider registering a separate company with the sole purpose of property ownership; receiving rent and incurring expenses. To HMRC, there is no difference as an SPV is a limited company registered in the same way with Companies House. The SPV might hold one property, or several properties bought and operated by the same company.

With an SPV, as all it does is retain property, the risk of financial underperformance is reduced; however, it won't have any financial standing as a newly formed company. 

What information should I provide for a commercial mortgage application?

Your lender will require a range of documentation, including:

• Details on company assets and liabilities
• Information on the business
• Property value
• Bank statements for the last three months
• Trading figures for the last three months
• Financial projections.

What types of commercial mortgages are there?

There are two types of commercial mortgages:

1. Owner-occupier mortgages - whereby the property is to be used for the business entity. 
2. Commercial investment mortgages - used for buy to let properties. 

What are the eligibility criteria for commercial mortgages?

To qualify for a commercial mortgage, generally you must be able to demonstrate:

• A healthy cash flow and liquidity.
• Enough income to cover the additional liability.
• A deposit in the region of 20% to 40%. 

How do I learn more?

Our team of experienced advisors have whole-of-market access and can help you to find the best deal possible on your commercial mortgage.

Complete our simple form to get the process started, and one of our advisors will be in touch.