How to save money on your Commercial MortgagePublished on 24th May 2018 2018-05-24T19:59:33+00:00 - Last update on 8th January 2019 2019-01-08T15:05:43+00:00
Got a project involving property that needs financing? Then why not apply for a Commercial Mortgage? One of a number of products covered under Property Finance, Commercial Mortgages allow you to purchase property, fund redevelopments or even release equity from your existing property portfolio. But, although Commercial Mortgages offer an array of benefits for your business, you’ll naturally want to enter an agreement on the most favourable terms for your business’ needs. So, if you’re considering applying for a Commercial Mortgage, here are just a few ways that you could save your business money:
- Choose an appropriate product
- Cover more of the property’s equity
- Review the lender’s costs and fees
- Improve your credit profile
- Consider repaying a Commercial Mortgage early
What types of Commercial Mortgage are there?
There are two types of Commercial Mortgages that you can choose from which affect how much interest is handled throughout the agreement. Although a Fixed Rate Mortgage maintains a constant rate of interest throughout, you risk losing out if market interest rates decrease.
On the other hand, you could apply for a Variable Rate Mortgage where the interest on the agreement can change periodically depending on the current market interest rates. Even though you could save money this way if interest rates fall, you, in turn, risk paying more should they increase instead. So you need to consider whether you’d prefer a fixed rate or the prospect of potential savings.
How much of the property’s asking price or equity should I cover?
Although lenders require you to cover at least 20% of the property’s asking price or equity, they’ll generally favour your application more if you cover up to 40%. Doing so could save you money on two counts. Firstly, lenders will see that you have a large stake in the property and may offer a lower interest rate as a result. Secondly, you won’t need to obtain as much money via a Commercial Mortgage, saving you money on interest yet again.
What additional costs do lenders charge?
Lenders may attach a number of additional charges onto their mortgage products, ranging from arrangement fees, legal fees or late payment penalties to valuation fees. So in order to help you gain the most cost-effective solution available, review the mortgage illustration document and compare how other mortgage lenders charge for their products. With your findings, you can give yourself leverage during negotiations and possibly reduce or negate some of these costs.
How can I improve my business’ Credit Profile?
As well your credit profile, lenders will assess any supporting documents regarding your business’ financial situation and performance. If you have any outstanding CCJs, tax demands or arrears, you should consider settling these before applying as they’ll affect your credit score. Your credit score is an important factor when applying for a Commercial Mortgage since the weaker your score the higher the interest rate you’ll be offered.
Can I repay a Commercial Mortgage early?
If you can afford it, paying off a Commercial Mortgage early could make sense under certain circumstances. As well as considering whether you’d be subject to a redemption penalty, assess whether you have sufficient funds to do so, have a reliable income each month and whether market interest rates could rise in the near future. If you choose to do so, it may increase profitability and equity in your business and could free up money in the long-run. So if you have a large amount of money sitting around that you’re aren’t currently using, this might be an avenue worth exploring.
Thinking about applying for a Commercial Mortgage?
Whether you’re acquiring your first permanent premises or you’re an experienced property developer, obtaining the funds you need to achieve your goals can be a painstaking process, especially if you don’t know where to look. But for many business owners who have goals centred around property, applying for a Commercial Mortgage could be a viable solution. Yet, if this does look like a product that’s worth exploring, you’ll also want an agreement that comes with with a competitive rate to match. But how can you achieve this? Well, the answer to that is simple. Not only can we help you source an appropriate solution, our free and impartial service could probably save your business money too. So if you’re looking to purchase property or fund a long-awaited redevelopment project, apply for a Commercial Mortgage today, or find out more with Rangewell.
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