Commercial Mortgage Finance
Real solutions for your commercial property success
Buying Commercial property - or releasing funds from property you already own - can give your business some powerful advantages. But you must have expert support to secure the funding that’s right for your needs.
Commercial property represents a major investment for your business. Buying property can provide the premises you need to run and grow your business, while reducing your monthly outgoings compared with renting.
It can provide a property that you can let out to generate an income, as well as capital growth.
It can also create a valuable additional asset for the future of your business - an asset that you can use to generate additional funding by remortgaging, or using as the security for a loan.
Buying with a Commercial Mortgage
A Commercial Mortgage is one of the most common forms of finance used to buy a commercial property. Commercial Mortgages operate like residential mortgages, with a large loan secured on the property itself. However, unlike a residential mortgage, the rates and terms for a Commercial Mortgage are arranged on an individual basis. Lenders will look at your business, accounts and projections to ensure that it has a future and set interest rates based on the level of risk they believe it presents.
Commercial Mortgages can be used for all types of commercial property.
Buying your business premises
With a Commercial Mortgage, your company could buy the premises where you operate or buy new premises to move into, as part of a planned programme of growth. Buying your factory, warehouse, office or even land could all be possible with a Commercial Mortgage, and can frequently reduce your monthly outgoings compared with renting your premises.
Residential and commercial buy to let
Commercial Mortgages can be used to fund the purchase of property to be let out. This approach is commonly used by professional residential landlords, as well as buy to let limited companies, to help build a property portfolio. Less well known are commercial buy to lets. These might, for example, allow you to buy warehousing and let it out to other businesses.
How much can you borrow?
There is no upper limit on what you can buy with a Commercial Mortgage - making it suitable for any size of property purchase. However, because of the legal and administrative costs, it is uneconomical to borrow less than £50,000. Some lenders have a minimum of £75,000, or possibly more. Below this level, a Secured Loan may be more appropriate.
A deposit will be required. A typical loan-to-value ratio that you may be offered if yours is a new business with no trading history will be 50% of the purchase price. Owner-occupied businesses, such as offices, represent a better risk for lenders and can normally get a maximum loan-to-value of around 80%.
Commercial Mortgages usually run for 15 years, but longer terms are possible. There will be valuation, arrangement and legal fees to consider. There can also be additional costs for the services of professional advisors. These are generally higher than the costs expected with a residential mortgage.
The rates and terms they offer will reflect the lenders' view of your business and the level of risk they believe it presents. A sound business in a growing sector could expect to secure the best rates and terms, but the views and criteria of one lender can be very different from another - which is why it is essential to get expert help when you are ready to arrange the best commercial mortgage.
Repaying a Commercial Mortgage
You may be able to choose a repayment mortgage option where you pay the capital and interest back each month or an interest-only mortgage where you only pay the interest back each month. If you choose this option, the lender will seek evidence of an appropriate investment policy that will cover the outstanding capital at the end of the loan term.
Fixed and variable rate deals are usually between two and five years, after which payments may switch to the lender's standard variable rate.
There are many reasons why you might want to inject a large sum of money in your business. Whatever your plans, getting the funds you need at the most competitive rates can be essential.
If you are looking at the most cost-effective way for your business to raise cash, property remortgaging or refinancing may be the solution.
If your business has acquired or started to acquire its own premises, you could be sitting on a valuable and appreciating asset which acts as a store of wealth.
Commercial Property Refinancing lets you access that wealth, and use it to provide the scale of funding your business needs while keeping costs down. A Commercial Mortgage is a loan secured on property assets, and can help you buy them. A Commercial Remortgage lets you release the investment you have already made in your business and use it again for any purpose.
Mortgage Refinancing works by letting you take out a new Commercial Mortgage on your existing property. If you own the property outright, all the money you raise is yours to use in any way you wish.
If you are refinancing an existing Commercial Mortgage, you can repay your original loan and use any surplus cash to help build your business.
In both cases, you repay the loan over the time agreed, and regain full title to your premises when the funds are paid off. The chances are that by doing so you will be able to take advantage of rates that are exceptionally low. A Commercial Remortgage can be among the lowest cost types of lending that is commercially available.
So, if you want to raise cash, a Commercial Remortgage can be the most cost-effective solution available. With current low interest rates and high property values, it could be the simplest way to get the funds you need.
How to arrange Commercial Property Refinance
Many commercial lenders will be able to provide property refinance. Most will have similar requirements.
Lenders will want to see your financial information, including balance sheets, statements showing profit and loss and cash flow, and details of your plans for the future. They will also want to confirm the current market value of the property you want to refinance. The condition and type of the premises will be important, and if the valuation has changed since you took out your original mortgage, this could have an impact on the loan-to-value calculation for a new loan.
Before taking the plunge and refinancing a Commercial Mortgage, business decision makers should ensure they are fully informed about the process and consider all of the pros and cons
While there are clear benefits to refinancing, there are drawbacks too, so it is crucial for businesses to think carefully about whether it is the best option in the long term.
Reducing your outgoings
If reducing outgoings, rather than raising additional cash, is your priority, refinance can still be the solution.
You do not need to have paid off your current mortgage to arrange a new one. Your property will probably have appreciated in value, and the means that the chances are that you can get a better deal on your existing loan. So if you want to reduce the monthly repayments on your current mortgage, cut the demand on your cash flow and release funds for use elsewhere in your business, refinancing your current Commercial Mortgage could help. You may be able to pay off an existing loan and replacing it with a new one at a lower cost.
Commercial property solutions from Rangewell
Commercial property involves high costs, and it is important to have expert help to get the kind of funding that will help you reduce your outgoings.
At Rangewell, we have access to the full range of funding from lenders across the market. It lets us use our property finance expertise to support your business – and ensure that you have the financial solutions you need.
Even a fraction of a percentage point can make a substantial difference to what you actually pay, while fees and penalties can complicate the position still further. There are many different lenders who may be prepared to offer funding but each has their own approach to interest rates and fee arrangements, and comparing offers needs an expert eye.
At Rangewell, we know the lenders who can offer Commercial Mortgage finance, and we can use our expertise to identify the deal that really is the most appropriate for you. Our knowledge can not only help you secure the funding you need - it can save you a great deal of cash.
ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
REAL EXAMPLES OF WHAT WE CAN DO
Help a commercial landlord buy an old school for conversion into flats
Find the most competitive funding for a business wanting to buy its office building and depot
Find finance for an industrial unit operator buy an adjacent site to expand
Source funding to allow a landlord to build his BTL property portfolio
Arrange refinance of the listed office building of a small advertising agency ready to acquire a competitor
Helping you build your profits
Borrowing from specialist lendersLenders will look at your credit profile, the value of the property, and your exit strategy to make a decision that recognises your business needs.
Suitable for all types of property• Residential, commercial and mixed-use development • Conversion and refurbishment • Planning gain transactions • Part built development refinance
Reduce outgoingsRefinancing an existing mortgage can often let you enjoy more favourable terms - reducing your monthly commitments and freeing up cash.
Cost-effective fundingCommercial mortgages can provide the most cost-effective ways to raise large sums. It means funds for any purpose at the low cost of a property loan.
Build a property portfolioRefinancing a your property can help you buy more - making it the simple way to build a property portfolio.
Funds for any purposeYou can use the funds you raise for refinance for any business purpose. Refinancing can therefore provide funds which might otherwise be outside lenders approval criteria.
Download Rangewell’s free and detailed guide to Commercial Property Finance
What types of funding are available for commercial property?
How do commercial mortgages differ from a residential mortgages
How can refinance free up funds?
What are the costs?
What are the restrictions?
The downsides and how to avoid them
Paperwork you need to provide with your application
Key terms to check
Costs may be higher than you expectInterest rates on Commercial Property Funding are set on an individual basis and may be higher than a residential mortgage. Legal and other costs may also be higher.
Rates are variableAlthough you may be able to fix interest rates for an initial period, the rates will be variable over the longer term. This means that your monthly outgoings could increase in the future.
The risk of lossAny property used as security, which may include your home, may be repossessed if you do not keep up repayments on your mortgage.
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