Your Friendly Guide to Getting a Commercial Mortgage
Thinking about buying or refinancing a property for your business? Getting a commercial mortgage can seem like a big step, but it's totally achievable! Let's break it down in a way that's easy to understand.
What's a Commercial Mortgage, Anyway?
Basically, it's a loan that helps businesses buy or refinance property that's not for living in – think offices, shops, or warehouses.
You might use it to:
- Buy your own place: Get a space to call your business's home.
- Get some cash out: Use the value of your existing property to boost your business.
- Invest in property: Buy a place and rent it out to other businesses.
- Want more details? Check out this helpful article.
The Different Types of Commercial Mortgages
- Owner-Occupied: Perfect if you're buying a place to run your business from.
- Commercial Investment: Ideal for those looking to buy property to rent out.
- Semi-Commercial: For those mixed-use properties, like a shop with an apartment above.
What Lenders Look For (Don't Worry, It's Not Scary!)
Lenders want to make sure you're a good bet, so they'll look at a few things:
- Deposit: Usually, you'll need about 25% of the property's value.
- Credit History: A good credit score helps, but it's not the be-all and end-all.
- Business Finances: They'll want to see your accounts – keep them up-to-date!
- Experience: If you've done this before, great! If not, they understand – running a business shows you've got what it takes.
Even if you don't tick every box, there are still options! It might mean slightly higher rates or fewer lenders, but it's still possible.
The Application Process (It's Easier Than You Think!)
Don't let the application process scare you! Here's a simplified version:
- Get your paperwork together: Think bank statements, tax returns, and your business plan (keep it simple!).
- Talk to a mortgage broker: They're like your friendly guides, helping you find the best deals. Many lenders prefer to work with good brokers - like us.
- Submit your application: Make sure it's complete and organised – it shows you're on top of things!
- Valuation and legal stuff: The lender will get the property valued and do some legal checks. Also remember to get those Asbestos, EPC, and Fire risk assessment reports from the seller.
- Offer and acceptance: If you're approved, read the offer carefully and get legal advice if you're unsure.
Things to Keep in Mind
- Interest rates: They're usually a bit higher than home mortgages, so compare your options. You can work out your potential costs here.
- Loan terms: Usually between 3 and 25 years.
- Fees: There will be some, so budget for them.
- How to repay: You can choose to repay the loan and interest, or just the interest.
- Who will own the property? Ask your accountant which option works the best for you. Also, remember that Commercial property yields can be higher than residential yields.
The Upside and Downside
The Good Stuff:
- Building up equity in your property.
- Potentially saving money compared to renting.
- Earning rental income.
- Security for your business.
The Not-So-Good Stuff:
- You'll need a decent deposit.
- You're responsible for repayments, no matter what.
- Property upkeep costs.
In a Nutshell
Getting a commercial mortgage is all about planning and knowing your stuff. By doing your research and getting some friendly advice, you can find a mortgage that helps your business grow.
If you'd like a hand, please get in touch. We're here to help!