If you are a business owner that is looking to buy a property for commercial or business use then commercial mortgages, also known as business mortgages, are for you.
Commercial mortgages process is familiar to those businesses who successfully grew and those who are looking for a new space to expand their existing business property. If a certain business owner would like to lessen their expenses when it comes to rents, maintenance and management fees, then processing a commercial mortgage can be the right course for them.
There are differences between a commercial mortgage and a residential mortgage. One of the main differences between the two is the value of their property. Commercial mortgages have a higher value than that of the residential property. Also, commercial mortgages tend not to be pre-set products like that of residential mortgages because of the sheer variation of land and premises. However, they do still stick to the pan-European Mortgage Credit Directive that covers mortgages may it be residential or commercial.
In short, commercial mortgages are loans that are secured for a property which is not your residence. There is a special type of commercial mortgage that is called buy to let mortgages. You will need a commercial mortgage if you are looking to buy a property to rent out for an extra income.
Ways On How To Get A Commercial Mortgage.
The lender can provide different options available in getting a commercial mortgage. It is important to find a lender that meets your particular needs and it takes time and detailed research in finding a commercial mortgage. In this stage, it is better to have a mortgage broker to help.
There are documents that you will need in order to have a successful application. Make sure that you have the following:
- Latest bank, liability and asset statement records
- Performance figures (both current and projected)
- Details of your partners and directors
- Tax returns (for a period of at least three years)
Commercial Mortgage Terms
There are many factors that can determine the mortgage terms. There are instances where in repayment plans are only for a three-year term and of course there are also instances where in others may offer a term of 25 years.
It is said that the average term is around 15 years.
However, factors such as the value of your property, deposits and number of lenders mortgages does have an effect on the repayment plans and terms.
Deposit For A Commercial Mortgage
The same with the terms, the deposit also can vary. Factors such as the type of business you will run can affect your deposit. However, commercial mortgage deposits are usually around 30% of the property value.
This type of mortgage is for a property that is both a business and a residential, for example, a flat above a shop or a pub. In this type of property, they usually fall outside the qualifications for a standard residential or commercial mortgage terms, thus, they need a specific mortgage product. Rates may vary in these type of properties however, lenders tend to be in the favor of those applications who have an experience in managing commercial properties.
Other Information About Commercial Mortgages
- You can get a commercial mortgage on a leasehold property but it has to be at least 70 years left on the lease.
- Switching from a residential mortgage to a commercial mortgage without any penalty would be decided by your current mortgage lender would make.
- Commercial mortgages are offered for most legal businesses that has a lower risk in investment.
- Fees such as legal costs, loan arrangement, and valuation fees comes with a commercial mortgage.