Commercial Mortgages
A commercial mortgage in the UK is a type of long-term mortgage or a loan secured against a commercial premise that is used for business purposes rather than residential. It is very similar to a residential BTL mortgage, however it is designed to specifically lend on commercial properties. Commercial mortgage is raised either by business owners to buy premises for their businesses (owner-occupiers) or let out commercial premises to other businesses and achieve rental income from this investment. For affordability purposes, trading accounts are reviewed for the business if the premises are bought for own use by the owners. If they are bought for investment purposes, rental income and contract with the commercial tenant will be reviewed by the lenders to ensure the figures stack up and right tenant occupies the premises.
These types of mortgages can be used to buy many buildings including:
Warehouses, Light and Heavy industrial units
Cafes, Hotels, Pubs, Restaurants
Garages, Hair Salons, Post offices, Workshops
Business Parks and Shopping centres
GP Surgeries, Dentists, Child nurseries, Care Homes
Shops and Convenience Stores
Offices
For owner-occupiers, the lenders will put a lot of focus on health of the business, trading history, borrower experience and trading accounts. They would like to ensure the owners has a good background of running the business and can afford the mortgage payments.
For commercial investment, the lender would like to review the contract the borrower/applicant/investor will have with the tenant, tenant industry/sector and overall figures to ensure the borrower can afford the mortgage payments and other expenses for this investment.
The good news is there are more lenders in the market now – high street banks and specialist lenders. If you have any premises you are looking to purchase either for your purpose or like to let it out for income, we are more than happy to review the market and advice you on the right lender and product.
Note: Janco Finance Ltd is not authorised and regulated by Financial Conduct Authority. We do not place term mortgages (BTL or commercial) directly but through our association with our sister company London Financial Advisors Ltd (www.londonfinancialadvisors.co.uk)
Typical terms:
- Loan sizes varies from minimum £50K to max £50m and above
- Loan to value (LTV): 75% (typically 65% to 70%)
- Term: 3 to 25 years
- Rates are typically higher than residential mortgage (around 1% to 1.5% above)
- Product Fee: Typically 3%