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Commercial mortgages
You’re likely to be interested in a commercial or business mortgage if you are considering purchasing premises for a business, or investing in commercial property such as an office building, retail park, or warehouse. But it’s important to understand from the outset, that commercial mortgages are a very different beast to residential or buy-to-let mortgages.
Like many other sectors of the mortgage industry, the commercial mortgage market is a tough one at the moment, so it’s vital to be armed with the right information to secure the best deals. Many people expect commercial mortgages to be similar to residential mortgages, but in reality nothing could be further from the truth – they have different rules and lending criteria to the residential market.
At Mortgage Buzz we can help explain the commercial market and guide you towards the best deals. Read on to find out more.
Types of commercial mortgage
There are generally two types of buyer looking for a commercial mortgage deal:-
- The first, and perhaps most common category is the owner-occupier. That might include prospective or current restaurateurs, hoteliers, shop or petrol station owners who plan to run a business from the mortgaged premises, or re-finance their current business mortgage;
- The second category is the commercial property investor, who plans to use commercial property such as a warehouse or office building, to generate income from letting to other businesses who operate from the premises.
What you need to know about commercial mortgages
In the current market, lenders are generally wary of commercial mortgages. That’s because they’re seen as a riskier lending decision than the residential market, and the downturn has seen many banks with too many bad debts related to commercial property on their loan books.
What does this mean for borrowers in the commercial market? We explain more in our commercial mortgage guides, but in general the commercial mortgage market is characterised by:-
- Fewer lenders;
- Usually only repayment mortgages offered;
- Higher interest rates than residential mortgages;
- Higher deposit requirements – generally 30-40% minimum;
- More complex legal work and higher setup fees.
Banks recognise that a commercial mortgagee’s ability to pay rests largely on either the success and profitability of their business (owner-occupiers), or the ability to find tenants and hold on to them (commercial investors). Both variables make commercial mortgages a more risky business from a lender’s perspective.
However, there is still a commercial mortgage market and banks willing to lend where the figures stack up.
Commercial mortgage quotes and advice
At Mortgage Buzz we understand how tough it is for UK businesses to secure finance, and that includes the commercial mortgage market. But with a team of FSA authorised mortgage advisers on hand to provide a free whole of market commercial mortgage comparison, we can help you find the right mortgage for your business or investment needs.
It’s a no obligation service with the aim of finding the best commercial mortgage deal for your circumstances. Just fill in the form to get the ball rolling.
If you’re just here on a fact finding mission, then feel free to browse the Mortgage Buzz guides, calculators and the latest mortgage news and comment from across the industry.
