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Understanding Commercial Mortgage – All Questions Answered

If you are a business owner running your business for a while, you must have thought about investing in properties. But purchasing commercial real estate isn’t a piece of cake. You will need investments or aid from other financial institutions. In such cases, commercial mortgages come handy.

Here We will discuss the questions most people have about commercial mortgages so that you have a clear perspective and make an informed decision. Plus, if you need professional help, you are welcome to book a free 30-minute booking with one of our commercial mortgage experts to discuss the matter.

What is a Commercial Mortgage?

A commercial mortgage is when a finance is secured against a commercial property, examples of this include shops, offices warehouses, or entire buildings.

How can I obtain a commercial mortgage?

A commercial mortgage is obtained in a very similar fashion to that of a standard buy-to-let mortgage, the lender will evaluate the borrower based on income and affordability as well as considering what rent can be achieved on the commercial property. This does not deviate too far from a buy-to-let purchase.

What to consider when taking on a commercial mortgage.

When deciding on taking out a commercial mortgage you will have to consider whether the assets you are looking to purchase will be acceptable by the lender.

Acceptable assets for most commercial lenders will fall under the following categories:

  • Retail
  • Office
  • Industrial
  • Leisure and Hospitality
  • Education
  • Medical

Can I get a commercial mortgage on bad credit?

Depending on lenders criteria you usually can get a mortgage on somewhat bad credit. The general rule to follow however is that the worse your credit score is the higher your interest rates will be. If you are looking for a commercial mortgage and you don’t have the greatest credit score speak to a broker who will advise you as to which lender will be best suited for you.

Can anyone get a commercial mortgage?

Commercial mortgages are available for Individuals and Limited companies. The normal minimum age for applicants is 21 years old and applicants are expected to have a UK source of income.

How much income is needed to get a commercial mortgage?

For most commercial mortgages there is no minimum income requirements for applicants as affordability is based on the rental income sourced from commercial property, however lenders will need to be confident that mortgages payments will not default.

What Loan to value (LTV) do I need to get a commercial mortgage?

The standard LTV for a commercial mortgage is 75%, however the bigger your deposit the better the rate you will be able to get.

What is a semi-commercial mortgage?

A semi commercial mortgage is when finance is against an asset that has both a commercial and residential element.

Semi commercial mortgages will normally come with better rates than fully commercial mortgages as lenders believe having a residential element mitigates some risk for the lender.

Most lenders will consider a property to be semi commercial as long as the residential element is more than 1/3rd of the whole unit.