Casa Capital

There are generally two distinct types of commercial property mortgage - one is essentially an owner-occupier mortgage where you're looking to buy a property for trading premises, and the other is a commercial investment mortgage, if you're purely looking to invest in commercial property and perhaps want to let it out to a third party (in which case, it may be viewed as commercial buy-to-let). The one you choose could have an impact on the kind of finance and resulting rates you're offered, so as with everything else in this complex area, you'll want to seek the support of a commercial property finance specialist to navigate the market.

Bear in mind that, whichever kind of mortgage you're after, you probably won't be able to buy the property in full by using this kind of loan. Mortgages for business generally require a deposit of around 25% to 40%, but in some cases you may be able use another property as security, provided you have considerable equity in it. Most commercial mortgage rates are variable and you'll be able to choose from a range of terms, typically from three years to as long as 40 years, but 15-30 year terms are generally more common. Shorter term commercial property finance is also available, but this is more commonly referred to as a property development or bridging loan.

Obtaining a mortgage to buy a UK buy to let property that will be owned by a company is easy and follows the same path as a buy to let mortgage. The Limited Company or the Special Purpose Vehicle (SPV) will be transparent in the eyes of the bank and the ultimate beneficial owner will be underwritten (not the company) and may need to provide the bank with Personal Guarantees (PG).

The amount in which you can borrow will depend on the type of commercial property finance you're looking for. If it's for owner-occupied property, you'll generally be able to find a mortgage at up to 70-75% loan-to-value (LTV), provided you can supply the necessary deposit. You'll be subject to a rigorous affordability assessment, too, which means the amount you can borrow will be dictated by the amount you're able to provide upfront and related affordability criteria.

It's a little different when it comes to a commercial investment mortgage. Here, the amount you'll be able to borrow will depend on the expected rental income generated by the investment, but even so, the mortgage typically won't be able to exceed 65% of the initial purchase price. In some cases, you may be able to find a deal with lower deposit requirements, but you'll be required to provide significant collateral instead.

A mortgage is often the biggest financial commitment of a person's life. Normally we seek advice from doctors, lawyers and accountants without questioning the need for their services, why should you take a risk trying to source a mortgage by yourself without the help of a mortgage adviser. Here at Casa Capital we have access to all lending banks in the UK in the Commercial space, meaning access to hundreds of mortgage products and solutions. Although most clients are very rate driven, there are many other factors that need to be taken into consideration when sourcing a mortgage.

There are three steps to finding the right mortgage for any client:

There are an abundance of products and choices available in the UK market. Some banks will offer discounted fees directly to brokers and offer products not avialable through high street lenders or comparison sites.

Some banks and institutions will offer the ability to make overpayments free of charge and some even allow you to exit or pay off the mortgage without cost, however no single bank does it all!

In an ideal world it would be great to have a bank offer the lowest rate, the lowest costs and charges, however where a lender appears great in one aspect it could be less appealing in another. That is why it is very important to understand all of your requirements fully before making a recommendation. There is no point in recommending a low rate that comes with mandatory salary transfer if you are unable to transfer salary due to other loan commitments as an example!

The main types of mortgage when you consider rate are as follows:

FIXED

A fixed rate mortgage is where the bank fixes the interest rate for between 1 and 5 years which protects the rate against fluctuation in the BOE Base rate or the LIBOR rate (depending on the bank).

TRACKER

This type of rate consists of a fixed margin stipulated by the bank plus the prevailing BOE Base rate or LIBOR rate which changes daily (although most banks use a 3 month rolling average rate). If you believe rates will decline then tracker type products are normally a good option.

VARIABLE

Some banks will offer a variable rate, an internal rate which is set by various internal departments within the institution. Although variable rates are no overly transparent, they can sometimes be cheaper than fixed rates.

Why not call us for a no obligation consultation to find out more