Commercial Mortgages

For many businesses, both large and small, one of the biggest decisions to be made is whether to buy or lease commercial property.

There are many advantages in buying commercial property over leasing although there is often far more commercial property available for lease than purchase so finding somewhere to buy in the right location could be the first problem to overcome.

Once a suitable property with the appropriate permissions for the business use is found, there are many competitive commercial mortgages available today, and repayments could well to be similar to rental outgoings or maybe even cheaper.

The added bonus is that over time, hopefully the value of the asset will increase to provide a capital gain. Maintenance and refurbishment costs need to be taken into account, however when leasing, the terms of many commercial leases often mean the tenant is responsible for these costs despite not having ownership of the property. Mortgage interest payments are tax deductible and it may also be possible to sub-let space not being used, with the lender’s approval to provide further income.

The property can always be sold at any time in the future while many commercial leases are very long term and there may not always be an option to end the agreement early if circumstances change.

A commercial mortgage can be used for many different types of venture such as the acquisition of business premises, commercial and residential investment, property development or expanding an existing business.

Some lenders place restrictions on the use of commercial premises and some types of business may be excluded by some lenders entirely. The terms of commercial mortgages vary considerably and depend upon the type of premises, land or business.

The majority of banks and building societies will offer commercial mortgages and each lender will have their own lending criteria. Most lenders will be looking for a positive credit rating, although it is possible to find a good deal, even with an adverse credit history. Usually a commercial lender will expect an existing business to be stable and profitable. Many will ask to see long-term financial projections, business plans and previous years’ audited accounts but not all.

Generally, most providers lend 70% - 80% of the purchase price of the property, although it may be possible to secure more with personal guarantees. This leaves the borrower to raise a significant deposit of 20% - 30%. Most commercial mortgages are for a term of 15 years or more.

To talk to one of our experts about the best option for property ownership for your company, please complete a Mortgage Enquiry Form and we will arrange for a specialist adviser to contact you.