How to get the best commercial mortgages

Commercial mortgages are any loans secured for properties which are not intended to be the buyer’s residence. They can be particularly difficult to generalise as there are usually multiple factors which can influence how good a deal can be achieved. 

Most domestic properties are relatively easy to describe and assign under a handful of categories, commercial properties come in a much wider array of sizes, shapes and purposes. Additional factors to consider which can affect what kind of deal is possible include the wider range of locations where commercial properties can be situated, as well as the financial circumstances of the potential buyer. 

Each potential loan will be assessed individually, and the lender will determine the deal according to the particular set of circumstances involved. 

Security For a Commercial Mortgage

It is unlikely a business loan of up to £25,000 will be enough to secure premises to operate out of, and loans of more than this amount will require security in order to decrease the risk from the lender’s perspective. A higher loan means there will be legal and administrative fees to be paid when taking security on commercial property, though it is often recommended for economic reasons to seek a loan of over £50,000 when using security. Many lenders don’t even offer the choice, having a minimum-security loan of £75,000, sometimes even more.

The security that can use used to acquire such a commercial mortgage will be mostly in the form of the property you are buying itself. However, lenders usually only approve 70% of the value of the property as security, requesting that the difference be paid in cash. 

An alternative here is to offer additional security to cover the difference, which can come in the form of other property that the mortgage applicant has considerable equity in. 

Commercial Mortgage Contract Length

A business buying a property will need to identify whether or not a longer mortgage is more favourable for them than a shorter one. Commercial mortgages can usually be obtained for a variety of time spans, typically ranging between three and 25 years. Which time span is more favourable to a particular business will be determined by a variety of factors, including whether or not the company has plans to expand in the future and whether that might entail purchasing another property or selling the current one and moving into a larger building. 

There are also shorter term finance options which might be best suited to some firms’ interests, either directly for a purchase or simply as additional funds to finance the day to day operations during the initial outlay for a mortgage (especially if the security difference is going to paid in cash rather than additional security). Usually referred to as a bridging loan, these can last from a couple of months up to a couple of years.

How to Find the Best Commercial Mortgage Deal

Experience and expertise in the field is essential for identifying the best commercial mortgage deals. Businesses both large and small will require a mortgage broker who knows and understand the UK’s commercial property market inside out, as well as being willing to listen to their client and understand their individual needs in order to better identify the ideal commercial mortgage deal for them.

If you need a mortgage broker that will listen to your business needs and conduct extensive research across all finance options before suggesting the best deal for you, then contact us on 0844 855 0699 or email info@rynerandpartners.com.