Commercial Mortgages: Buy to Let

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Commercial Mortgages: Buy to Let

Buying a commercial property to rent out to a business is one of the fastest growing forms of investment in the UK, following on from the rapid rise in residential buy-to-let ventures and the capital growth potential of commercial property.

The types of properties lenders generally consider suitable for investment purposes as buy-to-lets include offices, retail premises, industrial units and restaurants.

When buying commercial property to buy and let out, typically most lenders will want to make sure the rent will cover the mortgage by 130%. All lenders will have their own criteria, but typically they will lend up to 75% of the market value of the property and in some cases, it could be more.

When making an application for a commercial buy to let mortgage, the lender will usually require details of income and liabilities, copies of at least 3 months bank statements (sometimes as many as 6 months may be needed) and full details of all leases on the property.

Straightforward commercial leases are fairly easy to organise for business tenants. The legislation however, for this type of lease is more complicated than a residential lease so it is always a good idea to seek legal advice when drawing up an agreement and to ensure that any necessary clauses are added. Covenants and title deeds to some commercial properties can also be complicated, which can also increase legal costs. A `shorthold tenancy’ may be the best type of lease to opt for to avoid problems regaining the property in the future.

The term of commercial buy to let mortgages tends to be anything up to 25 years and can either be set up a variable or fixed rate basis. Variable rates are usually set between 1.5% and 3% above the Bank of England’s base rate or the LIBOR, London Inter Bank Offer Rate. Most lenders will charge an arrangement fee of around 1%, which becomes due on acceptance of the mortgage offer and this sum will often be added to the loan amount.

If you are considering taking out a commercial mortgage for any type business or buy-to-let, talk it through without obligation with one of our specialist mortgage advisers first. Please complete a Mortgage Enquiry Form and we will arrange for one of our experts to contact you.

Alternatively, you can call us on 0845 108 0505.