David Beard

Expertly compared by David Beard

Products Updated October 12, 2021

 

Commercial Mortgages

If you need a mortgage or finance for commercial or business reasons then speak with our approved finance brokers for a no obligation quote and friendly advice. They can search the market place to compare and see which lenders are offering the cheapest finance deals.

 

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Apply for a Commercial Mortgage Online Today With Lending Expert!

If you’re considering applying for a commercial mortgage, speak to Lending Expert today for expert impartial advice. Whether you want to buy a new property or release equity from an existing property, a commercial mortgage could be the right step for you to take. Have a look at our extensive guide on what you’ll need to know before taking out a commercial mortgage.

 

Key Points

  • Commercial mortgages are for businesses who wish to borrow over £25,000
  • A commercial mortgage is secured against your business premises
  • They typically last between 3 and 25 years
  • You can still get a commercial mortgage if you have bad credit

 

What Is a Commercial Mortgage?

A commercial mortgage is a type of loan available for businesses that want to borrow an amount over £25,000. This type of mortgage is secured against your business premises. Commercial mortgages can be used for: buying property, investment finance, property development, refurbishing owner-occupied business premises, and buying motor vehicles, machinery, or other equipment.

 

How Does a Commercial Mortgage Work?

A commercial mortgage works by having no set rates. This means that every application that is submitted is reviewed thoroughly and considered on an independent basis. This involves calculating the risk of each application to the lender.

Typically, a commercial mortgage will last from around 3 to 25 years. If you aren’t looking for a loan as long-term as this, you could consider bridging loans or development loans.

 

Types of Commercial Mortgage

There are two main types of commercial mortgage:

  • Owner Occupier Mortgages – when the business owner is looking to buy a property in which they can run their business.
  • Commercial Investment Mortgages – these can be used if you are buying property as an investment opportunity. These are usually considered to be riskier than owner occupier commercial mortgages. You can also take out a commercial Buy to Let mortgage that allows you to purchase a property that is let to one or more businesses.

 

How Can I Get a Commercial Mortgage?

You can get a commercial mortgage by applying online today with Lending Expert. There are some things that you should have ready to make the process as smooth and quick as possible. This includes:

  • Three full years’ audited or certified accounts plus current management figures (if produced)
  • Two months’ bank statements
  • Assets and liabilities statement

 

 

Can I Get a Commercial Mortgage With Bad Credit?

Yes, you can still get a commercial mortgage if you have bad credit. However, it may be harder for those to acquire such a mortgage compared to those with good credit. Our expert advisors can help find a commercial mortgage that will work for you.

The reason why bad credit can make it harder to get a commercial mortgage is that you are deemed to be a higher risk to lenders than other applicants with better credit.

 

What Are the Advantages of a Commercial Mortgage?

There are several advantages of commercial mortgages:

  • There isn’t any scope for rent increases
  • The interest payment on commercial mortgages is tax-deductible
  • If your building’s value advances, your capital will also increase
  • With permission, you can sublet free space in the building
  • You are able to decorate and adapt the space as you wish

 

What Are the Disadvantages of a Commercial Mortgage?

There are also some disadvantages of commercial mortgages that you should be aware of, including:

  • You are essentially buying a building – this means you’ll have to pay a considerable deposit to secure your commercial mortgage
  • Moving location may be difficult as you will be removing yourself from the confirmed rental agreement
  • If your commercial mortgage is variable, interest rates could increase
  • If your building’s value decreases, your capital will also decrease
  • You are responsible for maintaining and repairing your building

 

Are Residential Mortgages the Same as Commercial Mortgages?

No, residential mortgages are not the same as commercial mortgages, despite being for similar purposes. They are both taken out to buy property or land, but there are some significant differences between the two mortgage types, including:

Value: The value of the land or property for commercial mortgages tends to be significantly larger than the value of the property or land with residential mortgages.

Risk: There are higher risks involved for lenders with commercial mortgages than residential mortgages. As such, commercial mortgage lenders usually require a large deposit of between 25% and 50%. This means you will be looking for mortgages with a maximum loan to value ratio of 75% or lower.

Mortgage Term: Residential mortgages tend to have a 25 to 30-year term as standard. A mortgage on a commercial property is typically much shorter than this. The term for commercial properties can be anything between 1 and 25 years, although many are capped at 15 years.

 

Is a Commercial Mortgage Right for My Business?

A commercial mortgage is right for your business if you are looking to purchase your own property, or release the value of your existing property. However, if you have found a new building but you cannot sell your current building, a commercial mortgage is not right for you. In this case, a bridging loan would be for you.

If you’re in any doubt about which mortgage would be the best for you and your business, speak to our expert advisors about your options.