Otherwise referred to as a business mortgage, a commercial mortgage is a type of mortgage that is commonly used by business owners specifically looking to purchase either land or property for commercial purposes. If you’re interested in learning more about this type of mortgage, rest assured that you’ve come to the right place.
Here at loancorp.co.uk, we’ve taken it upon ourselves to provide you with a detailed breakdown of what this type of mortgage is, in order to help you make a more informed decision about whether it might be right for you. So, without further ado, just keep on reading to discover more about commercial mortgages below.
What is a Commercial Mortgage?
Even though we have briefly talked about what a commercial mortgage is above, we think that it would be helpful to provide you with some more information on what this particular type of mortgage is. By having a clear understanding of what a commercial mortgage is, you’ll be in a much better position to decide whether or not it is the right choice for you.`
Essentially, a commercial mortgage is a type of loan secured on either land or property that is not in your residence. It is common for many businesses that have experienced growth to want to set up a new workspace (or simply expand from their current location).
While a commercial mortgage might not be the best option for all businesses, they are the ideal option for business owners who want to be able to have a working space that will allow them to avoid expensive rent prices, management fees, and maintenance costs.
How Do You Get a Commercial Mortgage?
If you are interested in proceeding with a commercial mortgage, then the good news is that there are many different ways that you can apply and attain one.
However, it is important to note that the process of actually getting a commercial mortgage can be a little long-winded with plenty of research required, which is why it is recommended that you consider seeking the assistance of a mortgage specialist or broker once you reach this stage.
As a general rule of thumb however, when it comes down to searching for a commercial mortgage, you are going to want to make sure that you have all of the necessary documents required in order to be able to apply for the commercial mortgage of your choice successfully. While lenders all vary in their approach to assessing eligibility for a loan, here are the basic documents that you should make sure that you have to hand:
- Tax returns (more often than not, you will need to be able to provide tax returns that reach across the period of at least 3 years).
- Your company’s performance figures (usually, you will be required to show both current performance figures, as well as all performance figures that you have projected, as well).
- Information about the directors and partners of your company. In some instances, mortgage lenders may wish to reach out to them prior to approving your application. This can be for a number of reasons.
- Recent banks, asset and liability records, and statements. These are required for safety checks, to ensure the validity of the company as well as to provide the lender with a clear idea of whether or not you are an eligible borrower for the commercial mortgage loan you are going to be applying for.
What Terms Does a Commercial Mortgage Have?
This is one of the most common questions that potential borrowers find themselves wondering when deciding whether or not a commercial mortgage is going to be the best option for them. Of course, it is important to always remember that terms can vary depending on a variety of factors such as the lender, how established your company is, and many other factors.
For example, there might be one repayment plan that is over the course of three years, while another repayment plan might have a much longer timeframe, such as 15 to 25 years. More often than not, the length of the repayment plan is often calculated in accordance with the size of the property or land being purchased, as well as the overall value of it, as well.
Although, it’s important to keep in mind that this isn’t the only factor that can contribute to the terms. Along with the size and value of the property or land that is going to be used by the business, the amount of the available deposit being paid will also affect the terms, and many lenders will typically offer commercial mortgages at a variable rate.
As a side note, there’s no denying that mortgage contracts can be difficult to understand sometimes, especially with all of the various wordings used.
That being said, if you are currently considering taking out a commercial mortgage for property or land, then it is highly recommended that you speak with your mortgage broker (or alternatively, a mortgage specialist) who will be able to help further.
How Much Is a Commercial Mortgage Deposit?
Just like with other types of mortgage loans, you will need to pay a deposit. When it comes to commercial mortgages, it’s important to keep in mind that deposits can vary from lender to lender, but the average amount tends to be around 30% of the property or land’s value.’
Final Thoughts
You’ve made it to the end of the guide. Now that you have taken the time to read through everything that we have shared with you above, we are hoping that you now have a much clearer understanding of what a commercial mortgage is, as well as whether or not it might be right for you.
As we have already mentioned above, if you’re interested in continuing with the process of taking out a commercial mortgage and have any questions or concerns – it is highly recommended that you consult with a mortgage broker or specialist who will be able to help you further. Bye for now!
