Compare Commercial Mortgages

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Compare Commercial Mortgages

A commercial mortgage is a loan secured on a non-residential property that will be used for commerce, such as a shopping centre, an industrial warehouse, or an office building. The mortgage is typically used to acquire a lease or to fund developments that will help the commercial property function for its intended use.

Commercial mortgages are very different from personal mortgages for a home. There are no ‘typical’ commercial packages available, so trying to compare commercial mortgages can be tricky. Stricter affordability testing can impact the speed and potential success of any application, so it’s important to know the ins and outs of this specific type of financial agreement.

Key features of a commercial mortgage

Usually no fixed rates, A higher interest rate, as it is regarded as higher risk by lenders. A better interest rate than a regular business loan, as those require property as collateral

Compare commercial mortgages and the benefits

Interest on a commercial mortgage is, pleasingly, tax deductible. If the property increases in value, the capital will grow commensurately. Extra income can be generated by renting out the property.

Commercial mortgages comparison and application

Doing a commercial mortgage application is similar to taking out a standard mortgage on a home:

  • An Asset and Liability form is submitted.
  • When commercial mortgage application is completed.
  • Information on the business is required and the property is valued.
  • Legal due diligence will be carried out by the lender’s solicitors.
  • When approved, a mortgage offer will be put forward by the bank.

Since a commercial mortgage is complex and requires several stages to process, it’s a good idea to use a commercial mortgages comparison service to explore the different options available and offered by various lending companies. A commercial mortgage should be shaped by your budget, building, and business type. A specialist advisor or comparison service will be able to tell you whether a lender is more likely to accept your application as well as find the best products and rates for your circumstances.

Key Factors

There are also other factors that need to be considered by those applying for commercial mortgages. It is still possible, for example, to apply for one if you have a bad credit rating, but it is highly likely that the interest rate will be higher to compensate for the risk. Any default on the mortgage may result in you losing ownership of the property.

A deposit for a commercial mortgage can be considerable, so it is best to ensure that you can pay both the deposit and the monthly repayments. If this is your first commercial enterprise, lenders may perceive you as being higher risk and request a personal guarantee to process your application.

Categories of commercial mortgages

Mortgage loans can be divided into two specific kinds:

Owner-occupier mortgages: These are used to buy property that will be used as a trading premise.Commercial investment mortgages: These are used for costs on property that will be let out.

The lending criteria for these two types will vary, as will the length of the lending period. The majority of commercial mortgage lenders will not lend for any period less than three years, so you may need to consider alternative options, if you require a short term finance option.

Fees for commercial mortgages

There are a variety of financial costs associated with a commercial mortgage.

An arrangement fee is usually added to the mortgage once it is approved. It may be requested earlier to cover the lenders’ work arranging the mortgage, even if you do not come to accept their particular offer. This fee will roughly be around 1% or 2% of the total offer.

During the process, a valuer will visit the property and complete a report for the lender. This visit will have to be paid for. The fee is based on individualised quotations that are payable to the lender after the initial offer has been accepted.

Applicants will also need to pay their own legal fees and those of the lenders. There are also the rates of interest to consider. Most commercial mortgages are paid at a variable rate, but fixed rate mortgages are also available.

Eligibility for a commercial mortgage

Applicants are required to pass the potential lender’s individual eligibility checks. These checks may include:

  • Checking the financial health of a business by assessing cash flow and any debts
  • Projected income streams that will cover the costs of the mortgage
  • The ability to pay the deposit, which can range from 20% to 40%
  • Assets associated with the mortgage
Compare commercial mortgages with alternatives

It may be that a commercial mortgage is not the right fit for your purposes, or that the process proves to be too onerous to go through. When talking to a comparison service, they may suggest a number of alternatives:

  • Bridging loans can complete the purchase of a property
  • A short term loan can allow you to access funds without making any specific long-term commitments.
  • Personal loans can be used to borrow an amount from £1,000 to £25,000.
Commercial mortgages comparison

Finding the best commercial mortgage to fit your situation and requirements can be tough. That’s where Bright Compare can help. At Bright Compare, we make sure that you get the best deal every time. Our comparison technology puts our users right into the driving seat with every financial decision they make.

Bright Compare’s smart comparison technology helps find the right deal that suits your unique situation and makes sure you get the best quotes in the fastest time. We do not sell any user data and will make sure that you never miss a renewal. Our service is simple, easy, and always accessible. The Bright Compare website is there 24 hours a day to compare the best prices for commercial mortgages any time you need—whether that’s over breakfast, scrolling in the evening, or in the middle of the night.

Frequently Asked Questions

No, but it may be more difficult. You may find that your application is rejected due to the perceived additional risk involved, or the lender may ask for personal guarantors, other assets to secure the loan against or evidence of secure income streams.

It is likely that you will find it more difficult than an established business. However, as many of these mortgages are judged on the strength of the investment opportunity, if you have a good business plan it may still be possible.

Usually you will need evidence of good credit, demonstrate a sound plan for repaying the mortgage and collateral. You will be in a better position if you are already a homeowner, have at least a 20% deposit, evidence of regular income and savings.

Yes, you can compare a commercial mortgage in the same way as a standard mortgage or a buy to let mortgage. In fact, because of the higher interest rates and different requirements you may need to satisfy to have it approved, comparison is important.

No, commercial mortgages are used by business owners for the purchase of property or land that will be used by a business. The higher risk factor for lenders means that they usually attract a higher interest rate, but not as high as loans.

Yes, although you will need to be prepared for the fact that a commercial mortgage will attract a higher interest rate than other mortgage types, it’s always worth using our smart technology to compare and identify the best possible rate you can.