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Commercial & Business Mortgages

 

A commercial mortgage is a loan secured on a commercial or business premises, it makes sense to own your own commercial property as not only will it be an appreciating asset but you will not be making rental payments on a property that is not yours. Also when you come to retire you will have an asset that can provide you with regular income if you choose to rent it out rather than sell.

 

Commercial Mortgages How to find the best deal

 

Because all business are  different a commercial mortgage loan needs to be assessed on a case by case basis, lenders generally take into account, amount of  time trading profitability and various other factors, before making an offer, rates can differ greatly depending on how well you fit the criteria of each lender.

 

What can be offered as security?

 

Generally lenders take the property you are buying as  security for the loan, which is typically 75% of the value of the property, and want a  cash deposit for the balance of the purchase price. If you don't have a deposit you can offer the lender additional security, i.e   other property which you have some  equity in that they can put a charge against

 

Commercial Mortgages on a Leasehold property?

 

Only if the lease remaining is more than 70 years, otherwise you will need additional security.

 

How long can I take a commercial mortgage for ?

 

Commercial mortgages can be anything from 3 to 30 years.  

 

Commercial & Business mortgages fixed or variable rate?

 

Many commercial mortgages are variable although some offer fixed rates to give you the comfort of future proofing your repayments, which can help if rates start to go up.

 

Commercial Mortgage Interest rates

 

Interest  rates on a commercial mortgage or business Mortgage are not pre-determined  Like with a residential Mortgage. When an application is made for a commercial mortgage a senior lending  manager will  assess the risk level when making the offer of a mortgage. A great deal of information is required before an offer can be formulated. The  rate offered will take into account all of the relevant information when the application is submitted. Low risk applicants will get the best market rates. Business Mortgage Lenders usually have a risk profile that they use to arrive at your offer.

 

How much can I borrow?

 

On an owner occupied property you can get up to 75-85% for your Business mortgage. If it is an investment Commercial Property Mortgage then the amount you can borrow will be determined by the rental income length of the lease and quality of the tenant

 

Fees

 

Arrangement fees are usually added to the Commercial Property loan when it completes. Some lenders  may charge a commitment fee up front, which is part of the overall arrangement fee, and  non-refundable. Typically  the arrangement fees charged will be 1% -2% of the loan amount for loans sub £1 million,  above this they tend to be smaller as the loan gets bigger.

 

Commercial Mortgage Valuation Costs

Commercial properties are different to residential ones, so a valuer will   visit the property and write a 10-20 page comprehensive report which will be submitted to the lender for evaluation the cost of this report will be in accordance with the value of the property, this is because the more a property is valued at the greater the risk to the valuers professional indemnity insurance, so although the work would seem the same for all values it is not just the amount of work but also the value that determines the business mortgage cost

The valuation fee is payable to the lender after an initial indicative offer has been accepted.

 

Legal Fees

 

You will have to  pay both your own legal fees and  of the lender. Legal fees for commercial property mortgages can vary according to the complexity of each case and can usually be agreed before the work begins, you can save costs by presenting all of the information required as quickly as possible.

 

Commercial Mortgage Brokers

 

A specialist commercial Mortgage broker with good  market knowledge can usually get you the best deal they  can present your case to the lender in a way that makes the whole package more presentable. In addition they have access to deals that you would not normally find on the high street as there are many more specialist commercial lenders other than the high street banks of would offer better deals and terms.

 

Broker fees

 

Expect to pay a fee of around 1% of the loan, but don't agree to pay anything unless you have an offer as with all things these can always be negotiated.

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Commercial Mortgage Guide

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Commercial Mortgages