B&B / Guest House Commercial Mortgage Rates
When prospective purchasers like you think about buying a B&B or Guest House, you understandably think that mortgage interest rates will be similar to those of a residential mortgage, after all you are buying in effect is a house, which is absolutely correct.
However, the difference is that you aren’t buying a house, you are in effect buying a business and as a result you’ll require a commercial mortgage which differs from a residential mortgage, principally on price and the number of years the mortgage goes out to.
A current example is that some residential mortgage lenders are now offering interest rates at 1% gross over a term of 25 years or more, whereas by comparison commercial mortgage rates are at some 2.75% gross over 15 to 25 years, and as with all mortgages, be they residential or commercial, the maximum term is generally limited by age and typically no lender will go out to a term which expires after 75 years of age, unless there are dependents that could take on the business to provide for a succession strategy beyond 75 years of age.
Whilst commercial interest rates are higher, the question you may be asking yourself is – can I afford to pay a higher rate of Interest? As always there is never a absolute answer, as with all commercial businesses, interest rates have to be considered against the backdrop of the business you are considering buying and the businesses’ trading profit, which services the commercial mortgage debt, as this is what any lender will consider against which is based on affordability.
That said, if a business on paper seems to be loss making, or only marginally profitable, then this doesn’t automatically lead to a decline to lend, as there are many other factors such as revenue and costs, that can affect the outcome, particularly as most B&B and Guest House owners “live out” of the business, so every situation is different.
This is where a professional broker, such as Stewart Hindley & Partners, who are experienced in raising debt for new to trade operators in the hospitality sector come into their own, with unparalleled experienced and only deal with lenders who specialise in hospitality finance to get the right mortgage for you and the business you are buying.
To learn more about how we at Stewart Hindley can help you purchase a B&B or Guest House, on the most competitive rates available, just get in touch and we’ll do our very best to get the commercial mortgage you require.