Buying a commercial property can be a huge – and daunting – prospect. Whatever your business goals are, we’re here to help you get your purchase off the ground.
If you’re looking to purchase property intended for commercial use, then you’ll need a commercial mortgage.
Some examples of commercial properties are:
- • Retail units and retail centres
- • Industrial buildings such as warehouses or factories
- • Office building
- • Care homes
- • Hotels
- • Semi-commercial properties
The loan you take out is usually repaid through rental income, or your company’s income, with the property itself serving as collateral. Unsurprisingly, larger companies – that channel significantly higher cash flow – tend to find it easier to secure lending for high-value commercial properties, however an experienced broker can assist with finding the right solution for you and your business size.
- • Owner-occupier. This means you own the property you trade from, ultimately giving you more control.
- • Commercial investment. This applies if you want to use the property solely as an investment and purchase as a business asset.
With more control over an asset that ultimately will appreciate over time, there are multiple advantages to owner-occupier commercial mortgages. Lenders usually offer slightly lower rates for owner-occupiers, as they view them as less of a risk than investors.
From care homes to office blocks, industrial spaces to restaurants, whatever the commercial property you’re looking to invest in, we’re best placed to advise you on the best financial solution for you.
Investors who plan to purchase a building for a commercial reason, but not to actually operate a business from it, will need a commercial mortgage. For example, you could purchase a shopping centre, and rent the separate units out to retail businesses.
In these cases, there are a lot of variables that can affect the mortgage rates and terms. Our specialist advisors can help with getting all your ducks in a row and negotiating the best deal for your circumstances.
It’s worth nothing that when considering your application, lenders may consider the following:
- · Your tenants’ business type
- · Your tenants’ leases
- · Any break clauses in their contracts
- · The property location
For commercial property finance, interest rates are usually higher than with residential mortgages. Generally, if you can provide a larger deposit, it will result in lower rates. For both owner-occupier and investment commercial mortgages, deposits are often higher than for residential loans, usually charged at between 25-40%. It’s worth noting that you’ll also need to budget for arrangement and valuation fees.
Crucially, your loan terms and headline interest rate will rely on the amount of income your business can generate, and the predicted popularity or success of your service or product. Whatever your situation – for example if you’re looking for a high loan to value (LTV) commercial mortgage – we can find the best deal through our extensive network of lenders.
Mainstream lenders are usually geared towards SMEs looking for smaller loans, meaning their rates can be unsuitable for your needs. Private banks and lenders are in a much better position to provide high-value loans that can be tailored to suit your circumstances.
There are now even specialist commercial mortgage providers that offer specific services – for example focusing on certain regions or a particular size of business. Additionally, many lenders don’t advertise their products, meaning they can only be accessed via a specialist broker. We can seek out exactly the right product for you, whether you’re looking for more competitive rates or interest-only options.
They’ll usually consider the type of commercial property you’re buying and the size of the deposit you’re putting down to calculate your loan amount and interest rates. Some lenders
To purchase a building with both commercial and residential space, you’ll likely need a semi-commercial mortgage. The property is still classed as mixed-use if the percentage of commercial space is much lower.
If the residential section has a separate entrance so that the tenant doesn’t have to use the commercial space to enter their home, two separate mortgages will be required: one commercial and one residential.
It’s worth nothing that there can be many variables between the ways banks and lenders differentiate between commercial and semi-commercial financial agreements. For example, some work on the 60/40 square footage rule – where if it’s less than 60% commercial, it’s instead classed as regulated – whereas others base it upon the split in monetary value.
Either way, an experienced broker can advise you on the right type of finance for you and match you with the best lender for your circumstances.
When considering your application, lenders will take into account the following:
- · Your deposit amount
- · Your credit rating
- · How affordable the property is
- · The strength of investment
- · Trading history
Crucially, it depends on whether the flat has a separate entrance that doesn’t involve tenants stepping foot in the commercial space.
If it doesn’t, you’ll need a semi-commercial mortgage. If it does, you’ll need a separate residential mortgage for the flat. Often, it can be difficult to secure residential finance in this way, as some lenders do not offer these kinds of residential mortgages.
Whatever your circumstances, we have extensive experience negotiating this type of finance, and we can advise on the best way forward. Ultimately, we’re committed to finding the best financial solution for you.
Commercial finance options can be highly variable, complex, and confusing to the untrained eye.
At Hectocorn, we can help you iron out the details, and will take into account your cash flow, current assets, and financial track record in order to present your situation in the best light. This is because sometimes, if lenders don’t think the business will be profitable enough, they will consider additional streams of income.
Additionally, we appreciate that things move quickly in the world of business, and you may be pressured to secure finance at speed. Your business may be growing, or there may be an opportunity that you need to take up immediately. Thanks to our contacts and experience in negotiating commercial mortgages, we can expedite the process and advise you exactly what you’ll need to achieve the best rates. We’re here to negotiate on your behalf, taking on lengthy conversations with various stakeholders so you don’t have to.