5 benefits of Commercial Mortgages

Published on 23rd November 2017 - Last update on 31st January 2018

Having a permanent premises is a crucial requirement in many UK sectors, providing an essential space for producing, manufacturing and selling your goods and services. However, for many developing SMEs, who traditionally aren’t cash rich, acquiring property or carrying out development projects is no small feat.

Although it can be tempting to pull your own funds together, real estate is often very expensive and, in doing so, may deprive other areas of your business. But you could avoid placing undue strain on your finances and seek out an alternative solution. If your goal is to purchase real estate, fund improvements or release equity from your portfolio, you could acquire the funds you need via a Commercial Mortgage. One of a number of funding options available through Property Finance, Commercial Mortgages offer a number of valuable benefits to your business, including that they:

  • Are applicable for a number of uses
  • Include a choice of products
  • Allow access to a large lump sum
  • Have long repayment terms
  • Have potential tax benefits

What can a Commercial Mortgage be used for?

Commercial Mortgages can aid your business in a number of ways. As well as enabling you to purchase real estate, you can also use this form of business finance to make improvements or release equity contained in your existing property portfolio. So if your goal is to open another branch, construct a new property, build extensions, carryout out renovations, fund refurbishments, release equity or acquire your first premises, applying for a Commercial Mortgage can pave the way the towards success.

Want to extend the reach of your goods and services? Are you looking to improve the quality of your property portfolio? Apply for a Commercial Mortgage today, or find out more about how your business could benefit!

What types of mortgage can I apply for?

Commercial Mortgages can have either a Fixed or Variable Rate. With a Fixed Rate Mortgage, the amount of interest that you’ll be required to pay remains at the same rate as when the agreement started. Although this provides you with greater certainty, you may miss out on any potential savings should market interest rates decrease at any point of the agreement.

However, the interest rates on Variable Rate Mortgages can differ according to market interest rates. Even though you could potentially make savings each month, you risk paying more each month should market interest rates increase. As such, when making a decision, it comes down to what you value most: certainty in the size of your monthly repayments or the prospect of potential savings.

How much can I borrow with a Commercial Mortgage?

Although funding typically starts from £50,000, the scale of the lump sum that you could receive will be based upon the property in question, which will also be used as collateral. If you’re looking to purchase, lenders will go by the property’s asking price, but if you’re looking to redevelop or release cash from a property you already own then they will also look at other factors, including how much equity is in the property or what the value of the asset will be post-development.

Another factor to consider will be how much of the property’s purchase price or equity you’re able to cover, which usually starts from a minimum of 20%. So if, for example, you’re looking at a £1,000,000 warehouse but cover 20% (£200,000) of the property’s equity, you’ll only need to take out a mortgage for the remaining 80% (£800,000). However, it’s worth noting that if you’re able to cover as much as 40%, lenders may look more favourably on your application and might offer a lower interest rate. The reason for this is that you’ll have a larger stake in the property and, in the lender’s perspective, this will make you more inclined to keep up with the monthly repayment scheme.

How are Commercial Mortgages repaid?

Commercial Mortgage products are gradually repaid using a Fixed Monthly Repayment scheme over an agreed term that can last from 3 – 25 years. As such, this type of finance allows you to spread out the costs involved into fixed, manageable monthly payments. That said, depending on the type of mortgage you’ve applied for, the amount of interest applied to each month’s payments could vary. Nevertheless, this type of repayment scheme can make it easier for you to balance these payments with your other monthly expenses, allowing you to maintain control over your budget. Plus, if you expect to run into any challenges regarding your finances, you’ll also be in a stronger position to spot them early and find a suitable solution.

What tax benefits do Commercial Mortgages offer?

As well as the ways in which the product can be used and how much you could borrow, another factor that makes a Commercial Mortgage so useful for your business is the potential tax benefits. The interest attached to your monthly repayments may be tax deductible and could be reclaimed when submitting your tax returns on a quarterly basis, enabling you to reduce your business’ liabilities. However, in order to know where your stand regarding any potential tax benefit, you should seek the advice of your business accountant before entering into any Commercial Mortgage agreement.

Thinking about applying for a Commercial Mortgage?

Property is a great tool your business if you’re looking to expand your customer base or increase the size of your day-to-day operations. The obstacle in your way is often the expense, which is where a Commercial Mortgage steps in. Thanks to the Alternative Finance Industry, the range of business lenders and Commercial Mortgage products on offer has never been so broad. Yet, although this is ultimately good news your business, this creates another problem. Where do you begin? However, that’s where we can help!

At Rangewell, we go above and beyond your typical brokerage. We’re an Access to Finance specialist working with over 300 lenders to give you a clear and in-depth overview of more than 23,000 business finance products. Our services are free to use and impartial, and we’ll also guide you through each stage of your application. We’re with you every step of the way. So if you’re looking to acquire another property or to improve the quality of your facilities, apply for a Commercial Mortgage today, or find out more with Rangewell.


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David Harrison

David Harrison

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