What are the benefits of refinancing a commercial mortgage?

Buying a commercial property can be a prudent investment. And, over recent years, the popularity of commercial property investment has increased rapidly, with investors looking for new opportunities to make substantial returns on their investments.

For businesses or individuals who own commercial property, refinancing their commercial mortgage can allow them to free up funds and change the terms of the mortgage.

If you’re a commercial property owner looking to refinance your commercial property, you have certainly landed in the right place. Within this article, we’ve taken a look at the benefits of refinancing a commercial mortgage.


What is a commercial mortgage?

A commercial mortgage is a mortgage used to purchase a commercial property. The repayments can be structured either with fixed or variable interest rate payments, depending on the terms of the lender.

As well as purchasing a commercial property, this type of mortgage can also be used to develop new premises, buy land, expand business premises, complete commercial developments and projects, or develop an existing property.


How does commercial mortgage refinancing work?

Many commercial property owners choose to re-mortgage their commercial premises as a way of accessing additional funds.

But what does the process involve?

Refinancing a commercial mortgage involves paying one mortgage off in order to replace it with another. This process allows commercial property owners to not only secure a better interest rate, but it can also free up more cash to invest in their business.

Whether you own or part-own a commercial property, you can re-mortgage and negotiate new terms with your lender, providing that you have a proven track record for making your mortgage repayments. You may also choose to look elsewhere for better deals but, if you’re switching to a new lender, they will expect you to pass their affordability and eligibility checks.


Why refinance a commercial mortgage?

Property owners choose to refinance their commercial mortgages for a number of reasons, including:

Releasing equity from the commercial property

Refinancing a commercial mortgage will allow you to release any equity you have built up since you took out the initial mortgage. This capital can then be used to invest in the business, improve cash flow, or buy additional properties.

Secure a better deal

Refinancing your commercial mortgage may allow you to access a better interest rate or better terms. If, for example, your fixed rate is coming to an end, refinancing may help you secure a better deal than being switched over to the lender’s standard variable rate.

Keep in mind that, if you switch to a new lender, you may be liable to pay an early exit fee.


Borrow more

If the value of your commercial property has increased since you took out your current mortgage, you might be able to borrow more against the value of the property. This can be useful if you want to free up funds to carry out renovations or maintenance on the property or expand the business.


Change the type of mortgage

If you are planning to change the mortgage from an owner-occupier agreement to a commercial investment, refinancing can allow you to do this. This can be useful if, for example, your business has outgrown the property and you want to let it yet rather than sell it.


What are the pros and cons of refinancing your commercial mortgage?


The pros

The benefits of refinancing a commercial mortgage are:

  • Access better deals
  • Reduce monthly outgoings
  • Release equity from the property
  • Access funds needed to grow and expand businesses


The cons

Of course, as with any type of financing, there are also potential downsides to consider if you’re thinking of refinancing your commercial mortgage, including:

  • The repayment period may be extended
  • Additional fees such as broker fees, valuation fees, and legal fees


Find out more

If you’re looking to refinance a commercial mortgage, it’s important to speak to someone experienced in the sector to ensure that you are aware of all the funding options available to you. Speak to one of our skilled and experienced team; we are always on hand to answer any of your queries regarding commercial mortgages. Get in touch today.

6 Things You Need To Know Before Buying Commercial Property

Guest Blog

In most circumstances, buying property can be considered a sound investment. This applies as much to commercial property as it does to a domestic property purchase. But in the same way that you would not buy a private house until you had gone through all the checks and put everything in place ready to make an offer, commercial property also requires that you attend to certain preliminaries before making any commitment. So here’s a list of six tasks which should definitely be on your to-do list.

  1. Does this property meet your business needs?

It’s true that a rental property may offer a business a certain extra degree of flexibility, but the downside is often that the business owner has little control over future rental costs. By comparison, a property owner agrees mortgage terms at the outset and therefore has much more control over future outgoings. In addition, where business tenants may have limited options to modify their premises, commercial property owners are free to make any alterations their budget (and the local planning laws) will allow.

It’s usually wise to invest in something slightly larger than you currently require. That means you have room for expansion when needed, and there’s always the option to rent out part of a building to generate additional income while leaving yourself some flexibility to make further changes as required.

Remember too to check ‘business basics’ like adequate parking facilities and good access to the transport links your business trading demands.

  1. Is this the most suitable type of property?

Unless you are an experienced investor, don’t buy a commercial property just because it’s an irresistible deal. Commercial property falls into distinct categories such as business offices, retail premises, industrial sites, leisure accommodation and special-function units like schools and petrol stations. As a novice, that means you should always go for purpose-built property and forget any ideas about conversions and/or complexities like possible ‘change of use’ applications.

  1. Have you set your budget?

Your pending commercial property purchase is a business acquisition and thus will need to feature in your business development plans. That in turn means exploring, and fixing, the budget you have available prior to searching the market. And given that this purchase is also a business investment, part of your planning should also quantify what return you would expect for this capital injection, and specify the period over which you will reap the rewards.

  1. Optimise the location

Most high-performing businesses will positively benefit from an optimum location chosen wisely. That means making relevant decisions e.g. about city-centre or out-of-town sites, the location of your potential market, how close you want to be to your rivals, as well as considering the future growth potential of the area.

This is one element where it will pay to speak to professionals such as estate agents and business brokers.

  1. Assess the local property market

To make an informed decision, you will need to check features such as: local commercial property values and pricing trends, property taxes, mortgage interest rates and rental values. This will give you detailed information about how much your proposed commitment might cost, and what returns you might expect. And as regards investment returns, your analysis will be more helpful if it can establish what your short-, mid-term and longer-term prospects will look like.

  1. Check commercial mortgage availability

There is, of course, little purpose in searching for a property if you are not eligible for mortgage funding. This should be considered as two separate issues:

  1. a) gaining acceptance ‘in principle’ for commercial mortgage funding up to a certain amount;
  2. b) securing a commercial mortgage on a property you intend to purchase.

Obtaining a mortgage in principle is largely a matter of having a good credit record and meeting a provider’s lending criteria, whereas agreeing a mortgage on a specified property is likely to involve detailed structural surveys and property assessments.

Here again, it is likely to be in your interests to seek specialist advice in each of these areas, especially given that commercial mortgage providers will require such detailed information to decide whether they wish to quote mortgage terms.

Finding a commercial property

You may find commercial properties listed on different online sites and perhaps be tempted to go it alone armed with your portfolio of information. However, just as in the domestic property market, the input of local professionals and/or those who specialise in your business sector can prove invaluable. They will ensure you find the best property for your needs and secure a good purchase deal which meets your business investment objectives.

By Matthew Hernon is an Account Manager at Dynamis looking after Business Transfer Agents, Franchises and Commercial Properties across BusinessesForSale.com, FranchiseSales.com and PropertySales.com.

How a B&B Commercial Mortgage makes good financial sense for your B&B business

With New Year around the corner, many of us start to think about what we want out of the year ahead.

The prospect of being your own boss and running a lifestyle business from home definitely has its appeal and a B&B Commercial Mortgage can help you to make that dream a reality.

New Year offers a new start, a chance to take the first step towards achieving those dreams and creating the life that you want. Whether you’re looking for freedom from office politics, or whether you’ve always dreamed about being the hostess with the mostess and creating a welcoming environment in your home for tourists and holiday makers, or whether you just want another income stream, a B&B could be exactly what you are looking for to take control of your own lifestyle and work from home.

One of the first things you’ll need to consider is B&B Commercial Mortgage finance. You’ll need capital to invest, but it’s likely that beyond a deposit, you’ll need B&B finance to bridge the gap.

Why B&B Finance?

If you’ve already got a mortgage on your existing home and you’re planning to borrow against it, you may want to reconsider. Using a standard residential home mortgage can lead to your mortgage debt being called in early if you are making an income from letting rooms in your property.

If your mortgage debt is called in early, you’re then faced with a challenge – either find alternative B&B Finance at VERY short notice or lose your home and your livelihood.

Other reasons you might need B&B Finance

Perhaps you already have a B&B that you don’t feel fulfils its potential. Sometimes a small cash injection is just what you need to be able to create the business you want, or to open up new opportunities with what you have.

Often a B&B Commercial Mortgage provider will take into consideration your plans for the business, delivering greater potential benefits at a lower rate than a standard credit card or bank loan might do.

Stewart Hindley & Partners are hospitality finance specialists that can help you find the hospitality finance you need to build the business you’ve always wanted. For more information on how you could benefit from hospitality finance, or to find out how you could raise finance for your hospitality business, contact Stewart Hindley & Partners on 01488 393049.