Commercial Mortgage Types
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Pros and Cons of Buying Commercial Premises
Commercial properties are often a solid investment
Buying commercial premises can be a good investment as it provides a business with stability, and the property itself becomes a significant asset. But, buying is a major step to take and should therefore be given careful consideration before any commitment is made.
The advantages to buying with a commercial mortgage include:
- The mortgage repayment is likely to be similar to a rental payment on the same property
- There are no hefty rent increases
- Interest payments on a commercial mortgage are tax-deductible
- Any free space may be sub-let, although permission from the mortgage lender will be required
- Capital can be increased by any gain in property value
The disadvantages to buying with a commercial mortgage include:
- Unlike renting, a substantial deposit will be required - money that could be used for more important business purposes
- Having a variable rate mortgage could mean being exposed to rises in interest rates
- Being responsible for factors such as maintenance, fixtures and fittings, insurance, decoration and security
- Owning a premise may make it harder to relocate the business, as selling business premises is not always an easy task. By renting instead, it may be possible to negotiate to end the rental agreement, or to find another organisation to take over the tenancy
- Capital can be decreased by any loss on the value of the property.
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