Commercial Mortgages

Commercial Mortgages Building

What is a Commercial Mortgage ?

A commercial mortgage is funding for a premises that a business operates from including:
Office Buildings
Warehouses/industrial units
Shopping Centres
Shops
Care Homes
Nursing Homes
Nursery Schools
Dentists
Vets
Pharmacies
Hotels
Guest Houses / B&B
Holiday / Caravan Parks
Agricultural Land
Funeral Parlours

Structure

This type of funding is for businesses that want to buy a property that they will operate from. It is different to a commercial investment mortgage which relies on tenant income.

Mortgages are a long term loan, typically structured so that it is repaid (amortised) over 15 years or longer. The security the lender will require will be a legal charge over the property, however many lenders also require a debenture.

Some lenders have maximum loan periods, for instance 5 years, therefore the loan will not be fully repaid and you will need a new loan when it expires.

All lenders have maximum Loan To Value (LTV) policies which mean you can borrow up to a certain percentage of the property value. A typical LTV maximum is between 65% and 75%.

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Pricing

Loans of this type are typically priced as a lender margin over the Bank of England Base rate (often just called “the base rate”) or over LIBOR.

Margins charged by lenders are typically from 2.5% upwards. There is usually an arrangement fee of 1% of the loan value upwards. Some lenders charge early repayment fees. Lenders offer both variable and fixed rates.

Other Costs

A professional valuation (PV) will be required, this will be instructed by the lender, normally at the borrower’s cost. Most lenders require you to have a solicitor to complete the legal work, if you are buying a property then the same solicitor can respond to the bank’s requests. We can help you find a solicitor if you require. Property purchases are usually subject to Stamp Duty or VAT, which can potentially be funded as part of your funding requirements.

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