Commercial

If you’re thinking about starting a business or even expanding an existing one, a commercial mortgage may help to make those expansion plans go a little more smoothly. A commercial mortgage is very similar to a residential mortgage, but there are certain criteria you have to consider before taking out a mortgage for a business property. The key thing to remember is that the mortgage is lent against the property’s value and, just as in a residential mortgage, the property is at risk if payments are not made on time. Commercial mortgages are usually payable over 15 years, although specific repayment terms depend on the lender.

Commercial mortgages are more specialised than residential mortgages in that the lender has a legal claim over the property until the mortgage has been repaid in full. Most lenders apply a loan-to-value ratio and will expect you to invest some of your own money into the purchase. Commercial mortgages are specifically designed for purchasing any commercial property used for business purposes including shops, factories, offices and warehouses. Commercial mortgages can also be used for taking over an existing business, purchasing a new building or buying land.

Although they often come with higher interest rates and more variables than residential mortgages, commercial mortgages are more flexible and can carry extra incentives for borrowers. In some instances a charge against non-business assets may be required to secure a commercial mortgage.

It is for this reason that the advice of a specialist in commercial mortgages is essential before you decide which mortgage to choose. You will have to meet all the lender’s criteria, including passing all credit checks both on yourself and on the health of your business. Some lenders also implement restrictions on the uses of commercial premises including the ability to sub-let to other businesses. Considering that commercial mortgages are for 15 years or more, it may be wise to consider your long-term business plans before selecting a specific mortgage offer. Again, the advice of a commercial mortgage specialist will help you navigate through the small print.