Commercial Investment Mortgages

Who can get a commercial investment mortgage?

Applicants

We’re able to lend to applicants in either their own name, or through a partnership, LLP or Ltd company – and even to trusts, pensions and overseas companies in some cases.

Where an applicant has previous adverse credit, we may still be able to offer finance. That said, depending on the issue and why it happened, the rate charged may increase slightly.

Lenders are usually happy to lend up to a maximum age of 75. Where there is more than one party to an application, we can usually base the maximum age on the youngest applicant.

Property types

We can fund almost any property, including the following:

• Offices – including single offices, office blocks and service offices.
• Industrial buildings – Including warehouses, factories, industrial parks and single units.
• Retail – Including shops, semi commercial mortgage units, shopping centres, parades and retail parks.
• Leisure – including pubs, bars, hotels, B&Bs, holiday complexes and guest houses.
• Portfolios – including mixed commercial and residential portfolios of any size.

How much can you borrow for commercial investment mortgages?

This is decided based on three factors – minimum and maximum lending limits, loan to value and affordability calculations.

Loan sizes

We offer commercial mortgages from £25,000, with no upper limit.

Loan to value

The maximum LTV offered in the market is currently 75%, through challenger banks.

High street lenders tend to be a little more restrictive, with 70% being the upper limit.

Usually, the higher the LTV required, the higher the interest rate will be, with larger deposits being rewarded with lower interest rates.

Affordability

Rental income plays a big role in calculating how much money you’re able to borrow, but it is only the first step.

The lender will consider the amount of rent received in relation to the anticipated monthly repayment. Rent received will have to be a certain percentage of the monthly payment (usually between 125%-145% – but all lenders are different).

Commercial investment mortgage rates & costs

Interest rates

The rate charged depends on a number of factors such as the type of property, loan to value ratio, quality of the tenant and the rent received.

High street banks offer commercial mortgage rates from around 5.5% to 6.5%, however, their affordability calculations tend to be quite strict and loan to values lower than that of challenger banks.

Most high street banks also prefer not to lend on an interest only basis, meaning the monthly repayments are higher and in some cases, this isn’t appealing to an investor.

Challenger banks interest rates start from around 6.5% and range to the 8% mark. Factors affecting this would be the property type, loan to value ratio and loan size.

Fees

You can expect to pay the following fees when applying:

• Lender arrangement fees – these fees are charged by the lender when the application completes and can usually be added to the loan. This fee is usually between 1-2% of the loan amount.
• Valuations – or survey fees – are charged early on in the application process to pay for a surveyor to visit the property and produce a report on it.
• Legal fees – are charged in two parts, usually towards the end of the process. In most cases, you pay both your own and the lenders legal costs, which is in contrast to residential mortgages, so can come as a surprise to some applicants.
• Broker fees – Most brokers charge a fee for their service – often 1-1.5% of the loan amount. We don’t charge a fee for loans over £100,000.

Interest rate types

We can offer loans on a fixed rate or variable rate basis, to suit your individual needs.

Fixed rate deals can be taken for anything from 2-5 years with most lenders, with some high street banks offering more flexibility over the fixed term length. Some will even agree to fix your rate for the whole mortgage term.

Where to get a commercial investment mortgage

Brokers

A broker can help you to navigate the market and will be able to quickly give you an idea of the products that you’ll qualify for.

As mentioned above, some brokers charge hefty fees, which can really add to the cost of taking out a new mortgage. We don’t charge fees for loans over £100,000, as we get paid by the lender.

Some brokers charge upfront fees for their services, regardless of whether they ultimately get you a commercial buy to let mortgage. We recommend that you exercise caution in paying upfront fees to a broker.

Lenders

Most lenders will accept applications directly from borrowers, but this is not the case with every lender. This is due to the specialist nature of investing in commercial property.

The lenders for these products can be broken down into three main types. The first is high street banks – these tend to offer the lowest rates, but have strict criteria and often lack flexibility.

Challenger banks charge slightly higher rates than the high street, but tend to offer higher LTVs and slightly more flexible lending criteria. Finally, specialist commercial lenders tend to offer very flexible lending, but this comes at the cost of higher interest rates – often around 8.5%.