Commercial Mortgages

What is a Commercial Mortgage?

The most common form of finance are commercial mortgages, these are basically a loan secured on a property which is not your main residence.

Depending on the type of property, you can usually borrow between 60-75% of the properties value, with a term of anything between 5-25 years, whether this be a purchase or remortgage.

Generally, commercial mortgages fall into two categories:

Owner Occupier Mortgages: Basically, this is a commercial mortgage to either refinance or purchase the commercial that you wish to occupy and trade from
Commercial Investment Mortgages: This is a mortgage to either purchase or refinance a property that you are renting out or wish to rent out.

Below we cover the following types of Commercial Mortgages:

Mortgages for Semi-Commercial Properties
Development Finance
Land Mortgages
Auction Finance

Benefits of a Commercial Mortgage

A commercial mortgages typically offer better interest rates than business loans because the lender has the security of the property in the event of default. Below are a few benefits of taking out a commercial mortgage:

You have the potential for capital growth
The interest on the loan is tax-deductible
You can make extra income from renting out the property

What fees are involved with a Commercial Mortgage

Valuation fee: This is a fee so the lender can appoint a valuer to visit the property to ensure it is suitable security. These tend to be higher than residential properties as the valuer has to take many factors into account, such as: rental yields, future marketability
Arrangement fees: The lender will charge an arrangement fee, typically between 0.75%-2% of the loan amount, this can usually be added onto the mortgage. If you choose this option, please be aware that you will pay interest on this amount over the mortgage term.
Legal Fees: Obviously legal fees can vary a lot in cost depending on your chosen solicitor, typically fees would be anything between £800-1500. With our connections, we would be happy to provide a competitive quote.
Broker fees: A specialist commercial mortgage broker will normally charge up to 1% of the loan, they will present your application to the lender to give you the best chance of success.

Can I obtain a Commercial Mortgage with Bad Credit

The simple is yes, it is possible to obtain a commercial mortgage with bad credit, obviously the lender will need a thorough explanation as to the reason for it, if for example, it was an unpaid tax bill, it is unlikely that a lender would want to help. However, if there is a genuine reason, they can adopt some flexibility if the rest of the application is of good quality.

Eligibility for a Commercial Mortgage

Lenders will need to assess both the viability of the business and your ability to pay the mortgage, they may ask for various information to confirm this:

Assess your current assets and liabilities
The businesses’ cash flow statement, including any debts the company have
A projection of the companies income/expenditure
Proof of funds to cover the deposit if a purchase
3 months personal bank statements & business, if applicable
Proof of ID & address verification

Your advisor can advise you as to what is required as it will be lender specific. Please contact us on 0330 094 5876 (local rate) and we will match the most appropriate commercial broker for your circumstances.

Mortgages for Semi-Commercial Properties

A semi-commercial mortgage is a mortgage to purchase or refinance a property of mixed use, a few examples of these would be as follows:

A commercial unit with an element of residential use
A guest house
Pub with living accommodation

It may be possible to purchase/refinance a property and add some residential element, such as converting unwanted office space into residential units, this can prove to be highly effective to ensure there is stability of rental income.

Semi-Commercial Mortgage Rates

There are a few factors that determine the rate the lender may offer you, such as: deposit size, type of property, business plan & viability. Your commercial broker will advise you in more detail.

Can I obtain a semi-commercial mortgage with bad credit?

The answer is yes, if the application with all the other factors is acceptable to the lenders criteria and there is a suitable answer for the bad credit, the lender will look favourably on the application.

For more information, please contact us on 0330 094 5876 (local rate) and we will match your requirements to a suitable commercial finance broker.

Development Finance

If you are planning to undertake a building project, then it’s imperative that you make the right choices as to the finance. Development finance is a loan that is used to fund a project such as:

Developing a piece of land into a number of dwellings
Converting an existing building into an apartment block
Refurbishment of an existing property
Regeneration project

With property finance, a lender may offer between 70-80% of the build cost, which obviously leaves a fair amount needed by the developer. The term of development finance is typically offered between 6 months-2 years, with a suitable exit plan.

100% Development Finance

If you already own the land or building outright, it may be possible to obtain 100% development finance, the lender will value the asset and will offer funds based upon the security.

What documents should you have to apply for development finance?

Your commercial finance expert will be able to guide you as to the lenders specific requirements, but it would be wise to have the following information available:

Purchase Price/Valuation of the land or property
Planning permissions
Building Regulations
Development experience
Total Build Cost, which should include material, labour costs etc
Contractor info, such as builders, architects etc
Gross development value
Duration for development to finish
Exit Strategy

Can I Obtain Development Finance With Bad Credit?

Yes, it is possible, as with all types of finance, if there is valid reason for the bad credit and the application is of good quality, a lender should still be able to offer development finance.

For more information please contact us on 0330 0945 876 and we will match your requirements to a suitable commercial finance broker.

Land Mortgages

Whether you are looking for a plot of land to build on for personal use or looking for finance to build a property or properties to sell, there are lenders who may be able to help. Having planning permission obviously enhances an application but even without, it’s not impossible.

How Much Deposit is needed to purchase Land

This very much depends on the type of land you are buying, for a residential plot, you may only need 20% of the purchase price or valuation, for other types, it may be more. Deposit may also be determined by the applicant’s credit history, assets and liabilities.

How to get a mortgage on land

Clients often say to us ‘how do I obtain a mortgage on land?’ this very much depends on the type of land someone is looking to buy, along with the financial details of all applicants.

Land Mortgage Fees

There are various fees involved with buying land, such as:

Arrangement fees: The lender may charge an arrangement fee, which in most cases, may be added onto the mortgage. Please be aware that if you do this, you will pay interest on this until such time as the mortgage is repaid.
Broker fee: Your commercial finance broker will charge a fee for their services, this will ensure that you receive the right advice and the right mortgage.
Valuation fee: This will allow the lender to instruct a surveyor to value the land, please be aware that if the lender lends the funds in stage payments, a fee is payable every time the valuer visits.
Legal fees: You will need to instruct a conveyancer to satisfy the lenders requirements. We are able to assist with a recommendation if you wish.

For more information, please call us on 0330 0945 876 and we will match your requirements with a suitable commercial finance broker.

Auction Finance

We deal with many auction houses and the idea of buying at auction can be extremely enticing but it
is important as it is with any purchase to do your homework first and ensure that all due diligence has been completed. Once that hammer goes down, you are committed to buy as you have exchanged contracts at that point, with most auction houses, you are immediately required to pay a 10% deposit, this is at risk if you haven’t sought advice as to how to finance the property/land you are purchasing.

You often have to complete the sale within 28 days of exchanging contracts, so if you have a property in mind, it’s worth speaking to your commercial finance broker way in advance of auction day to ensure everything is in place to complete in time.

We would suggest the following as to ensure a smooth and timely purchase:

Speak to your commercial broker: once you have found a property you wish to buy, speak to your broker, provide all the documentation needed in preparation for an application to be submitted
Apply for Finance: Once a lender is happy with both the property and yourself, the lender will carry out a valuation and if this is acceptable, will offer you an ‘Agreement to lend you are now ready to bid!
Auction: If your bid gets accepted, you are all set to go, pay the 10% deposit, instruct your solicitor and you now have 28 days to complete.