Mortgages on Commercial Properties
As such, the mortgage can either provide funds to buy a property where your business will run from; provide cash to purchase land for development; provide money to develop or extend an owner-occupied property, such as a bed and breakfast; or help fund the purchase of buy-to-let properties.
Furthermore, business owners can also use the mortgage to acquire another company or another property to rent out. These mortgages are becoming an attractive means of borrowing money for your business, provided that there are assets to secure against the loan.
Maximum loan to value (LTV)
A mortgage-owned commercial property should start to build up equity over time, through repayment of the mortgage and increases in property prices. This equity could be used in the future as capital for further expansion. It could also be used to invest in the business, funding the purchase of new and updated equipment, or to update the property and redevelop the business.
The equity in your property could also be used to consolidate business debts into a more cost-effective repayment solution, often with a longer term than the original debt. Capital could be used to enable the sub-letting of part of the business property, helping you to realise more income from the assets you own.
As with traditional homebuyer mortgages, mortgages for businesses are provided by a range of lenders at various rates. As with personal mortgages, business borrowers need to undergo financial checks to ascertain their suitability. These checks usually include three years of business accounts, financial figures for current and future years, bank statements, details of directors and partners in the business, and details of assets and liabilities.
What about the intended use?
Stamp duty is a purchase tax with varied rates payable based on the property’s price. Have a look at the Government's website for information on non-residential property stamp duty rates.
In many cases, this means borrowing against your personal property. However, once the business is established and has some equity you could work with a commercial mortgage broker to organise a change to this arrangement.
You may wish to expand the business or refurbish and update the premises. Re-mortgaging can be a cost-effective way of financing this because mortgage rates will typically be cheaper than other commercial finance options.
Many clients wish to re-mortgage a property to obtain a better deal than their current mortgage. This is potentially valuable if you have had your current mortgage for some time. A remortgage would involve providing new figures, projections and a valuation which could result in you being offered a better deal and interest rate if your position has improved. Remortgaging would also give you the option to choose a fixed rate mortgage if you are concerned that the current low interest rate era is coming to an end.
Another reason to consider re-mortgaging is if you are having trouble in repaying other forms of borrowing, such as overdrafts and loans. Remortgaging could give you a more manageable monthly payment by spreading the repayment over a longer period. However, you could pay more interest in the long-term.
Because we play by the book we want to tell you that...
Your home may be repossessed if you do not keep up repayments on your mortgage.
There may be a fee for mortgage advice. The actual amount you pay will depend upon your circumstances. The fee is up to 1.5%, but a typical fee is 0.3% of the amount borrowed.