A commercial mortgage is a loan that is secured on property that you do not live in.
There are two basic forms of commercial mortgages: commercial investment mortgages and business mortgages.
Commercial investment mortgages
Most commercial investment mortgages are used for buy-to-let properties. The investor expects to make a profit from the rental payments from the tenants and the property increasing in value over a few years’ time.
Buy-to-let investments include residential property, which generates income from tenants paying rent. Buy to let investors also purchase commercial property such as offices and warehouses where the business or businesses operating in the buildings pay rent.
Semi-commercial properties are mixed residential and commercial properties. These include shops with flats above them, and pubs where the landlord lives in the same building.
A business mortgage can be used to purchase business premises for the sole use of the business.
Commercial mortgages can also be used to release equity in an building that uses an existing commercial mortgage. If a business has a current commercial mortgage, it may be able to switch to an alternative one with a lower interest rate in order to reduce its repayments. Why not talk to Ascot Mortgages about this, and let us find a better mortgage to match your requirements?
There is also a mixed type of commercial mortgage where a business buys premises for its own use, but lets some of the space to other businesses that pay rent.
A commercial mortgage may not be for a building at all, but can be used to purchase land.
Terms and conditions
Most commercial mortgages are secured by the value of the property that the mortgage is for. In a similar way to house mortgages, a business is expected to pay a deposit on the building, but this is generally a higher percentage than a standard house mortgage. Commercial mortgage lenders expect a deposit of between 25% and 40%.
The amount of deposit needed is affected by the purpose of the mortgage. If a business already owns other property, this can be used as additional security and could lower the amount of deposit required.
Commercial mortgages are long-term loans, most are for a period of 15 years or more. The borrower’s business needs to be financially sound and will be required to have their accounts examined by the lender. The business also needs to have a good credit record.
How to find the best commercial mortgage deals
There are many commercial mortgage lenders competing in this market and interest rates are currently low. This means that there are some good commercial mortgage deals available.
The best way to discover a good deal is to use an expert financial broker. At Ascot Mortgages, we find the best commercial mortgage deals to match our business client’s requirements.
Contact Ascot Mortgages today to discuss your commercial mortgage needs. We can usually find a quote for a commercial mortgage deal in a matter of minutes.