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What is a Commercial Mortgage?

A commercial mortgage is similar in principle to a residential mortgage, except that it is used to purchase property or raise capital for business purposes rather than domestic purposes. As with residential mortgages, lenders

Property rights are retained until the loan is fully repaid.

What would you use a commercial mortgage for?

Types of property that people can buy using professionals

The mortgage can be for hotels, restaurants, shops and anything

Roads leading to office buildings, factories, warehouses and farms.

Sometimes people can buy a business and property at the same time

If the two are internally connected, such as a hotel or restaurant.

When properties are purchased for use as business premises,

The mortgage is known as a commercial owner-occupant mortgage.

Alternatively, a commercial mortgage can be used for refinancing.

People may want to unlock capital from their existing business

property to enlarge or improve or enhance their premises or facilities

Cash for any other business purpose.

There are many other uses for commercial mortgages, such as buy-to-let

Mortgages, where people buy property (perhaps residential).

Invest and give out, or commercial development mortgage, where

People buy property to develop it and sell it for profit.

Why buy a place instead of renting?

Getting a commercial mortgage is a big leap for your business and

Careful consideration is required before entering into a commitment.

However, it can be an excellent investment and business to own

The premises you occupy can bring many benefits to your business:

In most situations, the loan amount is not considered

To be taxable income and interest payments are tax deductible.

You will have a clear repayment plan, favorable terms and rates

to meet your needs. (See below for more details on this.) Meaning

So you can manage your cash flow more easily.

Mortgage repayments can be cheaper than rent.

Any property purchase is an investment. Your property can

Appreciate the value a lot, thereby increasing your capital.

You have the potential to earn money by subletting. For example,

You may have space in your property that you don’t currently need,

And till then can earn money by giving it to another business

You need it to grow your own business.

Why use a commercial mortgage to raise capital?

If you already own business assets and need cash for your business

Unlocking the equity in your property by refinancing, for whatever reason

Or remortgaging is an effective solution. Think of it as a loan

Can be used for any commercial purpose – extension only or

Improving your environment. Doing so has many benefits:

Getting a business mortgage can be easier than a business loan,

Especially for small businesses, because assets provide security

lender

Unlike most business loans, the repayments are low

Term, commercial mortgages cover a longer period of time – anything from 15 to 25

Years depending on the lender and your financial situation

Business

In most situations, the loan amount is not considered

To be taxable income and interest payments are tax deductible.

There are two ways in which you can use a commercial mortgage

Raise capital for your business:

1. Refinance your current business mortgage to include a loan

The amount you wish to borrow.

2. Release the equity accumulated in your current property,

That is the current value of the property minus any outstanding mortgage

or debts connected with it.

What are the costs and repayment options for commercial mortgages?

Repayment plans are similar to residential mortgages. The main options are either fixed rate or variable rate repayment mortgages or interest only/endowment mortgages.

Unlike residential mortgages, however, interest rates for

Commercial mortgages tend to be higher because they are considered commercial loans

As more risk. Rates will vary depending on the situation

of your business, but generally speaking, the higher the risk

Higher interest rates. For the same reason repayment terms also tend

Being shorter than residential mortgages – usually 15-20 years.

Like most lenders, you will need to put up a deposit

A 100% loan-to-value mortgage won’t – meaning they won’t provide it

A mortgage for the full purchase price and a down payment will be expected

(usually 20-30% of the purchase price) from you as a form of security

Although some lenders accept as little as 5%, with more

interest rate for repayment).

Another cost to consider is the setup costs involved in arranging

Commercial mortgages, such as legal fees, surveys and broker fees.

As for the liability to repay the mortgage, it depends

Type of business. If you are a sole trader then the liability is on you

You may be personally liable if you are lied to and you default

On repayment – ​​this means that you may lose personal property as well

As a mortgaged commercial property. If you are a

Partnership, responsibility and liability apply to all partners. So

It is a limited company, responsibility and liability rests with the company

Business, although personal security may be required to approve

Mortgage dependent on business profits.

How do you get a commercial mortgage?

When applying for a commercial mortgage, you need to do your

Do your homework and create a strong business case to showcase your company

Ability to repay the mortgage. Be prepared to go thorough

Check your finances, including:

Your company’s business history: financial statements, profits

And loss accounts, balance sheets, past and current cash flows, all

Certified by Accountant

Future projections for your company: Long-term business plans,

Intended use of assets, earning potential, projected cash flows

Personal Finance: A Financial History of Yourself and Everyone

Other key stakeholders in the business, such as creditworthiness and

Past earnings

All these factors will determine the perceived degree of the lender

Risk in lending you money, which will determine the term

And the interest rate of the loan they want to offer you.

An obvious first step for many people applying professionally

A mortgage is to contact their bank or commercial lender, who have them

There is already an established relationship. However, for the same reason

You are unlikely to get a competitive contract.

The best way to get a commercial mortgage is to use the services of a

A specialist independent mortgage broker, who can help you get the best

Packages to suit your needs according to your situation. Even if your

Not having great credit doesn’t mean you won’t qualify for a

Commercial mortgage. Having a broker to represent you will really do

Strengthen your hair. They have access to a wide range of lenders and

Understand their lending criteria as well as your specific needs.

So they can conduct targeted searches, increasing your chances

To find the right loan. In fact, the broker may even be competent

Get several different options from various interested lenders, which

Provides an opportunity to negotiate a fantastic deal for you.

Money isn’t everything you save. Imagine if you try to apply

Think of the time it takes to do it all – multiple lenders yourself

Applications, and time wasted applying to unsuitable lenders.

The broker provides independent advice and specialist knowledge

are priceless.

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