Frequently Asked Questions
I’ve been turned down by my bank. Can I still get a commercial mortgage?
Commercial mortgage lenders have their own requirements for assessing loans. Even if you’re turned away by your bank, a good broker may be able to assist you.
There are a lot of specialist lenders that offer much more flexibility than high street banks. When looking for a new lender, you should assess the whole market to find the best fit for your business. Different lenders lean towards different sectors and different circumstances. An application that was turned down by one lender may be seen very differently by another.
When looking for a new lender after being declined, the commercial mortgage rates offered won’t always increase. Perception of risk and pricing varies at different lenders and as such you may find you can still secure competitive rates, regardless of previous adverse credit or unsuccessful applications.
Can I Take Out a Commercial Mortgage on Interest Only?
Yes, commercial mortgages are available on interest only, or full capital repayment. The number of lenders offering interest mortgages is limited, however. This means that by excluding any repayment mortgages from consideration, you may have to pay a higher rate.
Interest only commercial mortgages tend to be restricted to a maximum of 75% loan to value (dependent on sector). Although you will pay a lower interest rate, the overall interest payments over the term of the loan tend to work out higher than on capital and interest.
I’m Buying a Commercial Property Under Value, Will I Need a Deposit?
Commercial mortgage lenders tend to work on the lower end of the purchase price or open market value (OMV). If you’re buying for less than the OMV, you will generally have to put down a deposit based on the purchase price.
The exception to this rule is where you are an existing tenant. If this is the case and your landlord is willing to sell you the property under value, some lenders will class the discount as a deposit. This is rare and could result in slightly higher commercial mortgage rates, depending on circumstances.
If you are purchasing under value and do not currently occupy the property, the situation is different. You will either have to fund the deposit as shown above or look to take out a bridging loan.
It is more common for a bridging loan lender to consider the difference between purchase price and valuation as a deposit. The downside to this is that bridging loans cost money and will need to be refinanced onto a commercial mortgage when possible. Once the property is owned by you, the lender will generally be more open to working off the OMV, even if purchased under value. This cannot be guaranteed and care should be taken.
Before taking out a bridging loan to secure a commercial property under value, you should consider whether your exit is realistic. If the commercial mortgages available to you would cover the amount of the bridging loan, how much would they cost and how quickly could they complete.
You should only delay completion in situations where you’re able to afford the bridging loan. If you’re confident of your ability to repay should you take this route.
What are Regulated Commercial Mortgages?
Commercial mortgages become regulated if 40% or more of the property is to be used as or in connection with a dwelling.
This occurs where a property is used to both live in and trade from. The property must be occupied as a residence by the person taking out the mortgage and would still be classed as regulated even if the commercial part was let.
How do I Know if I Will Qualify for a Commercial Mortgage?
Our experienced advisors will be able to quickly run through your circumstances over the phone and let you know. We can usually provide you with written terms on the best option for your circumstances within two hours of your initial enquiry.
Can You Lend Against Leasehold Property?
Yes, our commercial mortgage products are available for leasehold properties. It is worth nothing that each lender will have their own rules around the minimum term remaining on the lease at the end of the mortgage term.