What Is a Commercial Mortgage?
A commercial mortgage is a loan secured against commercial property - either the property from which your business operates (owner-occupier) or an investment property you are purchasing to let to another business. They work similarly to residential mortgages, but the lending criteria, rates and terms differ significantly.
Types of Commercial Mortgage
Owner-Occupier Commercial Mortgages
Taken out by businesses buying the premises from which they trade - a factory, office building, retail unit, restaurant, and so on. Most lenders will advance up to 70-75% of the property value.
Commercial Investment Mortgages
Allow investors to purchase commercial properties to let to business tenants. The loan is typically sized against the rental income the property generates as well as the property value.
Key Eligibility Criteria
- Property type and condition - some property types are more straightforward to finance than others.
- Business trading history - most lenders want at least two to three years of accounts.
- Loan-to-value (LTV) - lower LTV generally means better rates.
- Personal guarantees - most lenders require guarantees from directors or owners.
- Rental income - for investment properties, tenant covenant strength is critical.
Commercial Mortgage Rates
Commercial mortgage rates are priced individually based on the risk profile of the deal, expressed as a margin over the Bank of England base rate or as a fixed rate. Terms typically range from 5 to 25 years.
The Application Process
Lenders will typically require two to three years of accounts, bank statements, property details and a valuation from an approved surveyor. The process typically takes six to twelve weeks from application to completion.
How ABL Can Help
ABL has access to the full range of commercial mortgage lenders and we know which ones have an appetite for different property types and deal structures. Contact our team to discuss your requirements.