MORTGAGE BROKER IN KENT, LONDON & SOUTH EAST
COMMERCIAL MORTGAGES
Commercial Mortgages are used to purchase or refinance a property used for commercial, or semi-commercial purposes. This can be on an owner-occupied or investment basis.
What Is A Commercial Mortgage?
Commercial mortgages cater to businesses and investors seeking to purchase or refinance commercial real estate assets. These encompass a wide array of properties, including offices, shops, factories, and restaurants. They can also include semi-commercial properties, where commercial use is mixed with residential use, such as flats above a shop.
Who Is A Commercial Mortgage For?
Commercial Mortgages can be taken out by individuals, Limited Companies, Trusts and even SIPPS for investment purposes, i.e. leased to another business. If the property is for the use of the individual or company, then it would be classed as an owner-occupied Commercial mortgage.
What Are The Advantages Of A Commercial Mortgage?
Term loans with potentially more competitive rates than short-term/unsecured business loans.
Interest payments may be deductible as a business expense to reduce profit and tax liability.
Some lenders offer interest-only terms for all or part of the loan term, to keep the initial outlay minimum.
What Are The Disadvantages Of A Commercial Mortgage?
Certain property types (Care Homes, Pubs, Churches) are deemed riskier for lenders and are harder to finance. This is due to factors like reputational risk or low demand (if the property has to be repossessed and sold quickly).
Products often have early repayment charges.
Examples Of Where Commercial Mortgages Can Be Used
Investors seeking to invest in commercial property.
Business owners expanding or buying first premises.
Asset types: offices, shops, restaurants, warehouses, factories, and more.
Process And Documentation Required For Commercial Mortgages
Application process stages:
Initial quote
Agreement in principle
Mortgage application
Valuation and solicitors instructed
Facility letter received
Completion / funds released
Documents required:
ALIE (Assets, liabilities, income, expenditure)
Property schedule
Tenancy/lease agreements
Proof of income
Business and personal statements
Personal guarantee
For investment deals, lenders may inquire about experience in:
Letting commercial property
The industry the property will be leased to
Owner-Occupied Vs Investment Mortgage:
Owner-Occupied: Affordability based on business financials
Owner-Occupied: Lenders consider a company’s net profit or EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortisation) to assess business health/ability to service loan.
Commercial Investment: Affordability based on rental/lease income
