Commercial investment mortgages are designed to enable an individual or a company to purchase a business property as an asset. This type of mortgage is used for a wide range of commercial properties including retail complexes, hotels, restaurants, offices, warehouses, leisure facilities, land for development and public houses.
A commercial mortgage is approved to an individual or company looking to buy a business property, either to rent or to use as their own business premises. Lasting from five to 25 years, you can usually find a 65-70% mortgage, which is a measure of loan-to-value ratio used to establish how much you will be borrowing in relation to how much the commercial property is actually worth.
If you’re purchasing a commercial building as an investment, the amount of rental income the property will generate is compared to the overall investment amount. As a general rule of thumb, this must not exceed 65% of the purchase price.
Everything you need to know about a commercial mortgage
There are a number of key features that you should be aware of before taking out a commercial mortgage, including the fact that there are no fixed fees. However, you will usually pay a higher interest rate on commercial properties than you would on residential property .
The good news is that commercial mortgages secured by a FCA approved broker typically offer better interest rates than mortgages arranged by individuals and the interest you do pay on your commercial mortgage is tax-deductible.
Deposits for a commercial mortgage
As with any mortgage, different lenders will have different requirements when it comes to a deposit for a commercial mortgage, so this is something that you should be aware of before applying.
Most commercial mortgages require a deposit of between 30% and 40% depending on the level of risk they deem your project to carry and the type of commercial mortgage you’ve applied for.
What do you need to apply for a commercial mortgage?
Before completing your commercial mortgage application, it’s important to gather the following information so the process can run as seamlessly as possible:
- Key business information
- Your personal and or business Bank statements, usually covering the last three to six months
- Trading figures, usually covering the last three years
- Proof of identity and address
- Lease and/or rental tenancy agreements
- A business plan for financial projections – this will help the lender determine how likely it is that you’ll be able to pay off the loan
If you’re considering buying a commercial property, 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.
Get in touch to speak to one of our skilled and experienced team. We are always on hand to answer any of your queries regarding commercial mortgages.