Question 1

What is a commercial mortgage?

Accepted Answer

A commercial mortgage is a long-term loan, typically running for up to 25 years, used to buy or refinance property or land for business purposes. As with a residential mortgage, the loan is secured against the property itself. Fewer commercial mortgage products exist compared with residential mortgages, but the loan values involved are typically much higher.

Question 2

What can a commercial mortgage be used for?

Accepted Answer

Commercial mortgages can fund a wide range of business needs: buying trading premises instead of renting, securing land for development, expanding an owner-occupied business, adding to a buy-to-let portfolio, releasing capital for investment or growth, consolidating business debt, purchasing equipment, or generating extra income by sub-letting part of a building.

Question 3

What are the benefits of a commercial mortgage?

Accepted Answer

Owning your business premises through a commercial mortgage can build long-term capital growth. As the property's value rises, so does your business's equity, which can then be reinvested to fund expansion or further acquisitions, rather than that value going to a landlord.

Question 4

Which types of business can get a commercial mortgage?

Accepted Answer

Commercial mortgages are available across almost every sector, including shops, offices, factories, warehouses, restaurants, pubs, hotels and B&Bs, working farms, and mixed-use buildings.

Question 5

How much deposit do I need for a commercial mortgage?

Accepted Answer

Most lenders offer up to 70% loan-to-value, meaning you'll typically need a deposit of around 30%. Some lenders will also accept security from an existing property if your business is asset-rich but cash-poor.

Question 6

What interest rates apply to commercial mortgages?

Accepted Answer

Commercial mortgage rates are generally higher than residential rates, reflecting the greater risk to lenders, and the exact rate depends on the loan amount, term and lender. Variable-rate commercial mortgages track the Bank of England base rate, while fixed-rate deals lock in a rate for an agreed period.

Question 7

Who can apply for a commercial mortgage?

Accepted Answer

Limited companies, SPVs, LLPs, partnerships and sole traders can typically apply for a commercial mortgage. Some lenders will also consider applicants with a poor credit history, low income, or a newly formed business.

Question 8

What's the eligibility criteria for a commercial mortgage?

Accepted Answer

Lender criteria vary, but most will assess cash flow, existing debt levels, how the property will be used, and current and projected business income. Applicants will usually need to provide:

• Cash flow and existing level of debt
• How the property will be used
• Current and projected business income
• Ability to repay the loan
• Three years' trading accounts
• Asset and liability statements
• Last three months' business bank statements
• Certified proof of ID and proof of residency
• Details and profiles of all directors and partners

Question 9

What fees are involved in a commercial mortgage?

Accepted Answer

Costs typically include a broker fee, application fee, valuation fee, arrangement fee, legal fee, exit fee and administration fee, though the exact amounts vary by lender.

Question 10

Can I get a commercial mortgage for a new business?

Accepted Answer

Yes, though options are more limited, as most lenders prefer businesses with a proven track record of profitability. Start-ups typically need a larger deposit, often at least 40%, and can expect higher interest rates.

Commercial Mortgages

Why Use Commercial Finance?

Purchase Business Premises or Land

Grow a Buy-to-Let Portfolio

Fund Business Expansion

Build Long-Term Capital Growth

Our Commercial Mortgage Services

Our Commercial Mortgage Process

Initial Consultation

Property Search & Analysis

Application & Approval

Completion & Ongoing Support

Review & Optimisation

Commercial Mortgage FAQs

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