What Are Commercial Mortgages?
If you’re looking to expand your business, or the cost of renting commercial premises has become too great, you may be considering investing in property.
Chances are, you’ll be looking to explore the range of Commercial Mortgage options on offer as a potential source of business finance and you’ll quickly discover that there’s a lot to be aware of.
With a Commercial Mortgage, you won’t have any sudden or unexpected rent increases, but obviously monthly repayments could go up if you have a variable rate deal. You may, however, be able to get a fixed rate mortgage for a period of time.
If the property increases in value, your business capital will go up and the interest repayments on Commercial Mortgage are tax deductible. You could possibly rent a portion of the premises to another company to help meet those monthly repayments, if your lender agrees to this arrangement.
Repayment options are not unlike those found in the residential market, but there’s usually a slightly higher rate of interest, as Commercial Mortgages are perceived as higher-risk.
It’s prudent to be able to offset this risk, with a deposit as large as possible – at least 20%.
As well as the standard valuation, arrangement and legal fees, there can be additional costs associated with a Commercial Mortgage, so it’s worth seeking clarification of this from the lender.
There’s a wealth of Commercial Mortgage providers out there, from the main high street banks to specialist lenders, so it’s worth us searching the market on your behalf, to find one that ticks all your boxes – for the right price.
Difference Between Fixed Rate And Variable Rate
You can get fixed rate mortgages for a period of time which ensures your monthly repayments do not increase, there are variable rates which can change, and there are even ‘blended’ rates – a mix of the two.
This is an important choice, because it determines not only your monthly payment amount, but also how much equity you’ll build up in the purchased property and how quickly.
Why You Would Benefit From Using A Broker?
Commercial Mortgages are complex and regulated products. You typically require higher deposits than residential loans, and a financial advisor will need to assess your application. As a broker we are here to assist you on your journey to securing a commercial mortgage.
Saffron Financial have a fantastic relationship with our panel of lenders providing us access to the whole market, we are honest and we completely understand that you as a business owner, your time is limited, we know you’ve got other things on your mind.
While you may want to evaluate dozens of financial providers on the market yourself, with Saffron Financial working on your behalf you can concentrate on running your business and let the experts do their job – saving you a lot of time and energy.
Types Of Commercial Mortgages
- Owner Occupied – Commercial Mortgages for owner occupiers are usually for two business situations: either a company wants to purchase the premises where it currently operates, or it wants to buy a new premises to move into
- Residential Buy-To-Let – Another common scenario for Commercial Mortgages is the purchase of residential property to be let out. This area is commonly used by professional landlords with a property portfolio, as well as buy-to-let limited companies set up for the same purpose
- Commercial Buy-To-Let – Similar to the above, you can use Commercial Mortgages for commercial buy-to-lets as well. For example, you might want to purchase a warehouse via your company and let it out to another business. Although this type of mortgage is similar to residential buy-to-let, the lender will look at different factors because in general its more difficult to rent out commercial properties