If you are interested in a mortgage for your business you need to know what the process will be like, and what will be expected of you. Here, the experts at Glenhawk.com explain what getting a mortgage for a business premises entails, to help you find the right mortgage for your property and you chosen business purpose.
A mortgage for business, or commercial mortgage for owner-occupiers, is a mortgage taken out on premises from which a business is run, whether this be an office, warehouse, restaurant or retail space. A business that is run from a home is different: even if you have a dedicated ‘work space’ within your home, if it is primarily a living space, you will require a residential mortgage.
However, if your property is truly half commercial, half residential, such as a shop with a separate flat above where the business owner and their family live, then business mortgages, known as a semi-commercial mortgage, will be available.
Mortgages for businesses are not subject to the same regulations as residential mortgages, and the rates tend to be higher, as investing in a business is generally seen to be much more of a risk than investing in a home. A mortgage on a mixed use property may be more heavily regulated, as these are more specialist.
Commercial mortgages will also usually require a deposit, though this is not always the case. If you do not have the necessary amount of money for a deposit, the lender will require some other form of security, whether this be in the form of other property with equity, or else an insurance policy or shares.
Mortgages for businesses are judged on an application by application basis, and therefore your eligibility will be judged on a number of individual factors, such as your industry sector, your credit history and your business’s performance history. Because of the bespoke nature of each commercial mortgage transaction, it is recommended that you employ the services of a Financial Conduct Authority (FCA) approved broker, who can use their vast expertise in the complicated financial market, as well as their contacts, to give you an accurate projection of what kind of business mortgage you are likely to achieve in your specific circumstances.
A broker will also be able to tell you which commercial mortgage lenders will expect you to switch banks, which work on a standalone basis, and how best to separate your business loan from your day to day business expenses. A broker will usually charge between 1 and 2% of the loan’s total cost, but their services could prove invaluable.
Some lenders will not loan to certain specialist enterprises. These may include hotels and guest houses, schools, health clubs, care homes, pubs and restaurants. It will therefore be worth your while to research different lenders to find out what kind of businesses they will accept applications from. Again, a financial broker can assist you in this area.
Although, as stated above, all applications are judged on an individual basis, as a general rule the elements of the commercial loan structure available will include interest only mortgage periods, long term repayment mortgages of up to 30 years (as with all long term mortgages, the rates will be much cheaper than any short term alternatives), and fixed, variable and hedged mortgage rates.
If you are interested in finding out more about mortgages for business, contact the experts at Glenhawk.