Business Mortgages – Commercial Mortgage for Business

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What are business mortgages?

A business mortgage is designed to allow you to fund the purchase or refinance a property for use as business premises. They are a form of commercial mortgage and are also known as owner-occupied commercial mortgages.

Applications are usually underwritten manually, rather than by computer, as with residential mortgages. This means that it’s very important that your application is well presented if you want the best possible chance of success.

Read on below to find out more or fill in the form to talk to an expert.

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Latest owner-occupied commercial mortgage rates

Compare the latest business mortgage rates from market-leading lenders. Find your perfect product and apply online.

Product CM0001 - Apply Now
Interest Rate
2.75%
Rate Type
Variable
Lender Fee
1.50%
Max LTV
80%
Min-Max Loan
£2,000,000 - £80,000,000
Property Type
Mixed Use Or Commercial
Own Occ/Investment
Owner Occupied
Max Term (Years)
20
Repayment Or Int Only
Repayment
Product CM0003 - Apply Now
Interest Rate
3.00%
Rate Type
Variable
Lender Fee
1.50%
Max LTV
80%
Min-Max Loan
£500,000 - £2,000,000
Property Type
Mixed Use Or Commercial
Own Occ/Investment
Owner Occupied
Max Term (Years)
20
Repayment Or Int Only
Repayment
Product CM0004 - Apply Now
Interest Rate
3.25%
Rate Type
Variable
Lender Fee
2.00%
Max LTV
80%
Min-Max Loan
£250,000 - £500,000
Property Type
Mixed Use Or Commercial
Own Occ/Investment
Owner Occupied
Max Term (Years)
20
Repayment Or Int Only
Repayment
CLICK HERE TO COMPARE MORE MARKET LEADING PRODUCTS

Criteria

Below are the main criteria points:

1Borrow up to 80% Loan to Value (LTV).
2Fixed and variable rates available.
3Rates from 2.25%.
4Borrow from £25,000 – no maximum loan size.
5Terms from 5 years to 30 years.
6Any security considered.
7Loans for trading or start-up businesses only.
8Previous adverse credit considered.
9Repayment or interest only.

What is classed as an owner-occupied commercial mortgage?

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 for my business?

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.

What is the maximum term for commercial mortgages?

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 a 100% business mortgage.

We offer owner-occupied commercial mortgages from £25,000 with no maximum loan.

What rates and fees can I expect on my loan?

There are many different mortgage products available for business owners, with the best deals starting from 2.25%. In reality, mortgage rates tend to sit between 2.85-6%, with the best deals being reserved for the strongest applicants.

In addition to the interest, you must also consider the fees associated with the loan. Arrangement fees tend to be between 1.5-2% of the loan amount.

For purchases, you will incur other costs including stamp duty, which can be a significant amount of money, so you must consider all payments that must make.

How much does a business mortgage cost?

Rates vary depending on the following-

  • Risk
  • The financial strength of your business
  • Industry
  • Loan amount
  • LTV
  • Credit history

To compare the latest rates, head over to our commercial mortgage comparison page, find your perfect product and apply online.

Alternatively complete our enquiry form to talk to an expert adviser, who will be able to run through your options and issue terms in under two hours.

Will I have to switch my commercial banking?

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 can be complicated and time consuming for some businesses.

If the idea of changing banks 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 this type of finance?

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. Mortgage valuations can often take some time, and therefore cause delays.

The legal process can be more complex than residential property conveyancing, so your solicitor must be 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 owner-occupied commercial mortgage

When making a new application, you must generally provide the following:

  • Your latest 2 years trading accounts
  • Proof of ID & address
  • Asset & liability statement
  • 6 months of 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 your business significant amounts in monthly payments. The rate charged on a mortgage 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 payments may be lower, the total charge may be higher.

Whether this is the right move for you will depend on your current financial position and the ability to maintain the current monthly costs. Where you are unsure, let us calculate the options for you and an adviser with present your mortgage options available to you.

If you’re not quite ready to talk to an adviser, compare your options now and try our commercial mortgage calculator.

How does this type of finance compare to a residential mortgage?

They actually work in very similar ways, although there are a few differences. The main ones are the deposit required on a commercial mortgage tends to be higher than a residential mortgage.

The fees also tend to be a little higher, as mentioned earlier on the page, often 1.5-2% of the loan amount. These higher fees continue as stamp duty also tends to be higher for commercial property.

Finally, although the process of applying for a mortgage for a business can be a little more involved, there tends to be more support available from your lender once the money has been lent.

Can I let out part of the property?

Yes, if you plan to let out part of the property, you can still take out a business mortgage.

The lender will generally check the affordability based on both your financial performance, plus the proposed rent and lend on this basis.

Where your business performance is not able to support the loan and you’re relying solely on the rental income, you may need to provide more information. Lenders will usually expect to see financial strength 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 support funding for up to 100% of the money due. The funding is then repaid with any related fees and interest on successful reclaim of the VAT.

Enquire online at the top of the page now to talk to an adviser, compare products online now or try out our quick calculator tool.

about-the-author-gary-hemming

About The Author

This content was produced by our Commercial Lending Director, Gary Hemming. Gary has over 15 years’ experience in financial services and specialises in bridging loans, commercial mortgages, development finance and business loans. He is widely respected in his field and regularly provides expert commentary for specialist trade publications, specialist business press as well as local and national press.

Gary Hemming CeMAP CeFA CeRGI CSP  -  
Commercial Lending Director

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