What is Classed as Owner-Occupied?
An owner-occupied commercial mortgage is when the ultimate owner of the company and the owner of the property is the same person.
If a property is owned by an individual, who is also the shareholder of the business, the application would be considered owner occupied. Although they are a different legal entity, the lender will take a common-sense approach and treat the company and individual as the same entity.
This means that low rates are available even when you rent the property to your own Ltd company. This is also true when the property is owned by a different Ltd company, or a pension fund – if the ultimate owner of both is the same person.
How Much Can I Borrow?
Business mortgages are usually available up to 80% of the property value. Certain industries will see this reduce, as will applicants with a history of adverse credit. Applications are available on interest only or capital repayment. Interest only applications are usually capped at 75% LTV.
Where a property purchase is subject to VAT, we are usually able to fund it using a VAT loan. This can be made for up to 100% of the VAT payable and is repayable when the VAT is claimed back.
Typically, terms are available up to a maximum of 20 years. Some lenders will accept terms as high as 30 years, although these are few and far between. Certain specialist industries such as doctors and dentists can take out 100% commercial mortgages.
We offer owner-occupied commercial mortgages from £25,000 with no maximum loan.
How Much Does a Business Mortgage Cost?
Rates vary depending on the following-
- Financial strength of your business
- Loan amount
- Credit history
To compare the latest rates, head over to our commercial mortgage comparison page, find your perfect product and apply online. Alternatively contact one of our experts, who will be able to run through your options and issue terms in under two hours.
Different lenders take different views in this area. Some lenders will insist that you switch all banking to them as a condition of the loan. In cases such of these, the loan will be dependent on the switch.
Sometimes we will be able to negotiate this position to ensure you only have to have certain payments going through the account or even remove the requirement altogether. On other occasions, the lender will be comfortable to issue the loan without any switch of banking. There is no hard and fast rule. Switching banking can be complicated and time consuming for some businesses.
If the idea of switching banking is something you are keen to avoid, then you should make the lender or broker aware straight away. A broker will usually still be able to offer you a mortgage without the need for banking to be switched.
It may be worth looking at the best loan with banking switched and the best without. That way you can make an informed decision about what is best for you as an overall package.
How Quickly Can I Complete?
Commercial mortgage applications can usually be completed in 6-8 weeks. This will, of course, depend on how quickly, and to what quality, information is given to the lender. The other key factors that can affect the speed of completion are the valuation and legal process. Commercial valuations can often take some time, and therefore cause delays.
The legal process can be more complex than residential property conveyancing, so it’s important that your solicitor is experienced in dealing with these transactions. If your application is urgent and needs to complete more quickly than this, just let us know and we will expedite it to meet your timescales where possible.
Applying for a Business Mortgage
When making a new application, you usually must provide the following:
- Your latest 2 years trading accounts
- Proof of ID & address
- Asset & liability statement
- 6 months business & personal bank statements
Your dedicated expert will be able to tell you the exact information required to progress your application.
Owner-Occupied Commercial Mortgage Uses
These mortgages aren’t just used to purchase property, they can also be remortgaged just like a residential mortgage to secure you a better deal.
This is common where the business’ performance has improved over time and lenders now see you as a lower risk applicant.
Where other borrowing has built up in your business, refinancing the debt into your commercial mortgage could save you significant amounts on your monthly payments. The rate charged will also be lower than that offered on most business loans.
It’s important to remember that when you refinance short-term debt to a longer term, although your monthly repayments may be lower, the total charge may be higher.
Whether this is the right move for you will depend on your current cash flow and the ability to maintain the current monthly costs. Where you are unsure, we can calculate the options for you and advise you on the options available to you.
Can I Rent Out Part of the Property?
Yes, if you’re renting out part of the property, you can still take out a business mortgage.
The lender will generally check the affordability based on both your profits, plus the proposed rent and lend on this basis.
Where your business performance is not capable of supporting the loan and you’re relying solely on the rental income, you may need to provide more information. Lenders will usually expect to see profitability in the business that they are lending to.
What Happens if the Property is VAT Registered?
Where you’re buying a VAT registered property, we may be able to arrange funding for up to 100% of the amount due, with repayment being made on successful reclaim of the VAT.