Commercial funeral home mortgages explained

If you’re considering buying a commercial property to open a funeral directors, then this article is for you. 

We’ve answered some of the most frequently asked questions surrounding the purchase of a funeral home but feel free to message our team throughout, if you have questions of your own.

Do I need any qualifications to open a funeral directors?

There are no legal formal training requirements however, experience and qualifications enable you to carry out your work professionally and could also help your application for finance.

Typical qualifications include a:

• Diploma in Funeral Arranging and Administration

• Certificate in Funeral Service

• Diploma in Funeral Directing

• Diploma in Funeral Service

• Diploma in embalming

On applying for a commercial funeral mortgage, lenders will take great interest in your experience in managing a funeral parlour and a lack of experience can lead some lenders to feel cautious about providing high loan-to-value mortgages.

That being said, there are a handful of commercial mortgage lenders who specialise in loans for start-up businesses and our mortgage advisors can help you locate them and compare their rates. 

What is a commercial funeral home mortgage?

A commercial funeral mortgage is usually a long-term loan that provides the cash to purchase a business premises. 

Business owners tend to opt for a commercial business loan as the rates can lead them to benefit through reduced repayments compared to renting. 

Owning the building can also allow you to sub-let as an additional stream of income. Furthermore, there could also be an opportunity for profit if the building increases in value. 

On agreeing to loan you the money to buy a property for a funeral home, commercial lenders will require you to pay regular mortgage payments with additional interest. 

How much is a commercial loan for a funeral home?

The rate you pay for a commercial funeral mortgage varies on a whole host of factors. Usually, the higher the risk you present to the lender for not paying on time and in full, the higher the interest rate.

Lenders want to feel confident that if they approve your loan, you can comfortably repay it, which is why a history of bad credit or low income can lead some lenders to again, charge higher rates to mitigate the risk of loss, or reject the application altogether. 

Lenders will ask you questions concerning your:

• Personal finances including your debt to income ratio

• Credit history

• Age

• Business profits 

• Future profit projections

• Marketing plan 

• Details and profiles of all directors and partners of the business

• Asset and liability statements

How long is a funeral home mortgage?

A commercial mortgage can vary in term length but keep in mind that the longer the term stretches, the more interest you’ll pay overall. Some lenders provide commercial loans with terms of 25 years while others specialise in loans with shorter agreements.

Getting a commercial mortgage to open a funeral directors is a big financial commitment so getting the right term length is critical for the future of your business. 

Always seek professional advice before applying for a mortgage. A broker can compare the various term lengths offered by commercial lenders and can calculate your repayments with each one to find you the best option.

How much deposit will I need to get a commercial loan to open a funeral directors?

Lenders each have their own set of rules and deposit requirements that they adhere to when making their decision about how much deposit you’ll need. 

Most mortgage providers who offer commercial loans require deposits between 25 - 40% of the property value, though this varies heavily depending on the circumstances of the borrower. So for example, a commercial building worth £400,000 could require a 25% deposit of £100,000. 

However, some lenders can be more flexible if the borrower has tangible assets to secure the loan against. This can present a great risk to the borrower, especially if the loan is secured against their home because if they default, it could be repossessed to cover the debt. 

Am I eligible for a commercial funeral mortgage?

Applying for a commercial mortgage without knowing whether you’re eligible could be a big mistake because if you get rejected, future lenders will see this on your credit report and question why another lender decided to reject your loan. 

To position yourself as a safe borrower, you’ll need to avoid any credit rejections and keep up to date with any current credit agreements, especially in the lead up to applying. 

Every lender has their own set of criteria that they’ll refer to when deciding if they can approve your loan so even if you’ve gained approval for a mortgage in the past, it doesn’t necessarily mean you can guarantee approval for another. 

How do I apply for a mortgage to open a funeral parlour?

Before you apply for a funeral home mortgage, ask a mortgage advisor to check your eligibility as this can be done without affecting your credit score. 

They’ll be able to tell you if you’re likely to get approved and if not, they can use their access to UK commercial lenders to compare alternative options and find you an affordable deal.

Our brokers will only ever recommend lenders that are suitable for your circumstances. They take the time to carefully compare contracts and highlight any terms that could affect your ability to repay your loan in the future. It’s their job to explain the pros and cons of the lenders available to you so that you understand the agreement and feel confident in your choice.

Once you have chosen a lender, they can even manage your application on your behalf to avoid any errors that could cause delays. 

What should I consider before opening a funeral parlour?

• Research the local community. Most people hire a funeral director within a few miles of their home, so take the time to learn about your target market and think about how you can position yourself as a member of the community. 

• Decide which services to offer. Are you opening a traditional funeral home or will you offer eco-friendly funerals?

• Research the price brackets of similar services in your area and look at your competitor’s marketing online.

• Consider your marketing plan for the year ahead. How will you get business and what is the most cost-effective way of promoting your brand?

• Decide whether or not you’ll offer repayment plans to your customers and how that could affect your profits.

Where can I go for advice about mortgages to buy a funeral directors?

Our team understands that applying for a commercial mortgage and opening a funeral directors is a big step and naturally, you’re likely to have lots of questions.