Buy-to-let landlords face rising costs because of cuts to tax relief on commercial mortgage interest payments, increased stamp duty and stricter underwriting rules. Many are looking to diversify their portfolios by investing in commercial or semi-commercial property.
To attract buy-to-let landlords to purchase commercial property for the first time, some lenders have cut their interest rates on commercial mortgages. According to an October 2017 MortgageStrategy.co.uk article, the best rates available on variable mortgage deals are 3% to 4% above the base bank Libor rate. Some large high street banks will provide preferential interest rates for customers already banking with them.
There are also many specialist smaller banks who will lend money for commercial property transactions. Some are prepared to lend for periods up to 10 years on an interest only basis.
Though rates are low, unlike standard mortgages the interest rates offered to borrowers for commercial mortgages will be based on a risk assessment of the investment.
Commercial property investment involves different conditions to buy-to-let residential properties; For example, most lenders will not lend on vacant commercial property. Bridging lending can be used to finance the purchase for the vacant period until tenants move in and start paying rent. Buy-to-let landlords considering investing are advised to seek expert financial advice about any proposed purchases of commercial or semi-commercial property before committing to a deal.
A mortgage broker can find the best commercial mortgage deals from both large and smaller specialist lenders for buy-to-let landlords who want to diversify their business.