Commercial Mortgages
Commercial mortgages are specially tailored for purchasing property that is intended for commercial use, the expansion of the current business premises, residential and commercial investment as well as property development. Therefore, commercial mortgages are generally put in place for offices, industrial properties or retail outlets. Alternatively, you may be buying a business that is tied into the property such as a public house, hotel or café. Whatever the reason you will need financing to pursue your business aspirations and taking out a commercial mortgage is our experts recommended choice to get you started.
Buying commercial premises are seen to be a very good investment. Owning the property that houses your business venture gives a good platform of stability, whilst the property itself could become a significant asset. However, deciding whether or not to buy your own business premises is a major step. Our experts suggest do some research on how much it would cost to buy your own site compared to the cost of renting it instead.
Business Mortgages
There are a number of distinct advantages for buying a commercial property. The likelihood is that the mortgage repayments will be similar to that of a rental payment on the same property. You aren't exposed to any hefty rent increases and the interest payments on a commercial mortgage are tax-deductible. You also have the potential to sub-let any free space that you might have, although, permission from your lender will almost certainly be required. Also the potential of the property’s value increasing is possible so your capital could well increase over time.
However, like any mortgage, there are always disadvantages to consider. The most obvious one being the substantial deposit you will need to ascertain for the property. If you chose to rent instead then this is money that could be used for far more important business purposes. Another problem is if you choose to relocate the business further down the line. Being the owner of the premises means you will need to sell the premises or finding a new tenant to take them over. It would be far easier if you were renting the premises as extracting yourself from a rental agreement is less time consuming. You will have the inconvenience of being responsible for such factors as maintenance, fixtures and fittings, decoration and security. Your capital will decrease in the event that the value of the property should fall.
Commercial Mortgage Rates
The interest rate for a commercial mortgage is much higher than residential loans because banks consider this type of loan high risk, as the ability to meet the repayments is dependant on the performance of the business. Therefore, the rate of interest you will be charged, after the lender has carried out a thorough assessment of your business proposal, should be in the region of one per cent and six per cent above the Bank of England base rate.
If your business has a good trading history, and the accounts show a stable performance and a well managed cash flow, then you shouldn't have any difficulties in securing a commercial mortgage.
The duration of a commercial mortgage is decided by the lender at their discretion. It is unlikely to be any longer than the standard 25-year loan common with domestic property, but it can be as short as a ten year repayment term.
