If you’re financing non-residential land or buildings, we’ll likely pursue a Commercial Mortgage.
If your aspirations are to finance a building or land not for Residential use, its highly likely we would be going down the Commercial Mortgage route. With these properties now more popular than ever owing to changing planning laws making the conversions of these buildings another viable option also.
Limited Companies, LLP’s, Trusts, Offshore, SIPPS, SASS, Personal Name, Overseas no real restriction here.
So with the above this would be deemed a ‘Owner-Occupied Commercial Mortgage’, as opposed to a ‘Commercial Investment Mortgage’ which is a purchase of a Commercial unit for another business to trade from.
Certainly both very viable and as you can imagine, each with their own separate underwriting criteria lenders would be looking for, crucial to ensure the lowest cost rate.
As above really anything that isn’t for standard Residential use. So Shops and offices are the first people think off but really, whether it’s a Hotel, Care-home, Warehouse, Industrial Site, Pubs, it covers all other types of properties.
General criteria is that if a property has less than 40% floor space for Residential use, it would be classed as a Commercial building by lenders and a Commercial Mortgage is what we would proceed on.
Where Commercial Finance differs is lenders will be taking a holistic view on the property, the business and you as the client when deciding in the maximum borrowing.
Typically the maximum LTV is 70%, although some can go to 75% on the right property/business with the right client.
To name a few areas that lenders look at this includes;
Yourself as client – Your net worth, do you have experience within the industry, etc. The Business itself – Is it trading, if so what is it EBITDA calculation coming out at. If not trading why not?
The property – Where is it, how do the other Commercial units fare situated around it? Who’s the current tenant and how long do they have the tenancy for? As you can see not a straightforward answer but with borrowing available up to £25 Million and beyond, the finance is certainly available.
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Another crucial difference with Commercial Mortgages is that these do typically take longer than standard Mortgage. Typically I would say around 4 months from application to completion.
The main difference here is the addition underwriting that’s involved but also the legal process being more lengthy.
Much like having a suitably qualified broker on hand, with Commercial Mortgages a suitability qualified Solicitor is also absolutely essential to ensure a smooth turnaround.
It is something that I go through in more detail on Commercial Mortgages as a lot of Solicitors aren’t up to scratch which can lead to further costs and fees.
These are higher, owing to the perceived higher risk and a more limited resale market but typically I would expect rates to be starting from around 2% to 3% higher than the market standard rates for Residential Mortgages.
With Interest Only, Repayment, Fixed, Variable, etc. there are a variety of terms available depending on your requirements
As above, really depends on your circumstances. You may limited experience in a particular industry however with suitable wealth in the background it may well be something that we can get lenders can take a view on.
Other lenders are happy to use no property assets as well if required.
Likewise you could have plenty of industry experience but with limited assets, we would look more closely at your track record to put together a suitable synopsis to get you the lowest cost options.
