A commercial mortgage is any loan secured on property which is not your residence.

 

When are Commercial Mortgages used? - Commercial mortgages are a type of loan for businesses that want to borrow more than £25,000. The mortgage is secured by a first legal charge on your business premises.

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A Commercial Mortgage can be used for:

• Buying a property

• Investment finance 

• Property development 

• Refurbishing owner-occupied business premises

• Buying motor vehicles, machinery, and other equipment

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Key Features & Benefits of Commercial Mortgages: A business mortgage plan differs from a regular mortgage in the following ways:

• There are usually no fixed rates for commercial mortgages

• You’ll usually pay a higher interest rate on commercial mortgages compared to regular home mortgages as these are considered higher risk to lenders

• Commercial mortgages tend to offer better interest rates than regular business loans as these require property as collateral

• The interest on your commercial mortgage is tax-deductible

• If your property increases in value, your capital could also see an increase

• You’ll be able to rent out the property to generate extra income

 

What documents are needed for a Commercial Mortgage?

• Bank statements covering the last 3 months

• Trading figures covering the last 3 years

• Proof of identity and address

• Lease and/or tenancy agreements

• You may have to provide a business plan for financial projections – this could help the lender determine how likely you’re to be able to pay off the loan

 

Types of commercial mortgages - Mortgage loans can be divided into two categories:

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Owner-occupier mortgages: This is used to buy property that will be used as trading premises for your business.

Commercial investment mortgages: This is used for property you’re planning to let out.  

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Eligibility and criteria - In order for you to qualify for a commercial mortgage, you’ll need to pass the lender’s eligibility checks which usually includes:

• The cash flow and any debts you may owe to assess the financial health of your company

• Your businesses’ projected income to determine whether you can cover the cost of the loan

• Your ability to pay the deposit which can range from 20% to 40% of the loan

• Rental income may also be taken into account as this will have an effect on your business’ cash flow

• General income, credit and assets.

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Please note: Manor Holmes does not advise on Commercial Mortgages but we have good working relationships with companies who can. With your permission, we can refer your case on. 

The Financial Conduct Authority does not regulate Commercial Lending or Finance.