Commercial Mortgage FAQs | Common Questions Answered
- Matthew Gibbs
- Oct 18, 2024
- 3 min read
Updated: 6 days ago
How much can I borrow with a Commercial Mortgage?
Some commercial mortgage lenders may lend up to 75% of a property’s value (Loan to Value or LTV), although this will depend on the property type, the strength of the deal and your individual circumstances.
If the property will be occupied by your own business, this is known as an owner-occupied commercial mortgage and affordability will usually be based on the business’s income and profitability.
If the property is being purchased as an investment, the amount you can borrow will typically be based on the expected rental or lease income.
How much deposit do I need for a Commercial Mortgage?
Most commercial mortgage lenders require a minimum deposit of around 25%, although this can vary depending on the property type and the strength of the application.
Generally, the larger the deposit you can provide, the better the rates and terms that may be available.
Can I get interest-only on a Commercial Mortgage?
Yes. Some commercial mortgage lenders offer interest-only options.
However, as with a residential mortgage, you will usually need to demonstrate a suitable repayment strategy for repaying the balance at the end of the term. This could include selling the property, refinancing or using other available funds.
What’s the process for applying for a Commercial Mortgage?
The first step is identifying a lender that is comfortable with both the property and your proposed plans.
The process will then typically involve:
Initial enquiry and formal application
Heads of terms issued
Lender due diligence, including borrower checks and valuation
Formal mortgage offer and acceptance
Legal work and documentation
Completion and release of funds
Do I need experience to apply for a Commercial Mortgage?
No. Some commercial mortgage lenders are willing to consider applicants with limited or no previous experience, depending on the overall strength of the deal and the support available.
What fees will I pay when taking out a Commercial Mortgage?
Commercial mortgage costs may include:
Arrangement or facility fee – usually a percentage of the loan amount and sometimes able to be added to the mortgage
Valuation fee – covers the surveyor’s assessment of the property, including value, condition, rental income and overall suitability for lending
Legal fees – you will normally pay both your own legal costs and the lender’s legal fees
Can I get a Commercial Mortgage with bad credit?
Possibly. Having adverse credit can affect both your ability to obtain finance and the terms available to you, but some lenders are more flexible than others depending on the circumstances and how recent the issues were.
Do I need a broker to arrange a Commercial Mortgage?
No, but commercial mortgages can be more complex than standard residential lending.
Many commercial lenders do not publish detailed criteria or openly advertise the types of deals they are willing to consider. An experienced broker can help identify suitable lenders, present the case correctly and potentially save significant time during the process.
Are there early repayment charges on a Commercial Mortgage?
In many cases, yes. Commercial mortgages are generally designed as longer-term finance solutions, so early repayment charges may apply if the loan is repaid during an initial fixed or tied-in period.
Can I get a Commercial Mortgage on a mixed-use property?
Yes. Some lenders offer semi-commercial mortgages for properties that combine residential and commercial use.
An example would be a shop with flats above on the same title. In these cases, affordability may be assessed using both the commercial income and the expected rental income from the residential element.
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