Mortgages for Business – how to get one
Mortgages for businesses are usually referred to as Commercial mortgages and are for those properties that are not your personal residence. Rental charges on business properties can sometimes become too costly and would therefore be beneficial to yourself in the long run to purchase a property instead, making it a sound investment for the future and hopefully making your monthly payments a lot lower than paying a landlord, therefore resulting in more profit for your business.
Getting a commercial mortgage works along the same lines as getting a residential mortgage really, where you need to have a deposit (preferably at least 20-25% of the property’s value), sometimes they will ask for a greater amount of deposit, depending on the value of the property etc. They will take a lot of factors into account before giving you a decision. Also the term of the loans are usually a maximum of 15 years, again though, they can be lenient depending on each individual case. With regards to getting a commercial mortgage, it is advisable to seek the help and advice of a mortgage broker rather than going to comparison sites as you could for a personal mortgage as they are a lot more complex and more often than not, you will need quite a substantial deposit. There is a lot more paperwork involved and you will need to factor in all your costs such as arrangements fees, legal fees as well as the mortgage broker’s fees. A financial advisor will need to assess your application for you. All these fees will be higher than with a residential mortgage application as there is a lot more involved for all the parties, for example, the solicitor will need to check all legal implications for your business.
How to Calculate Your Commercial Mortgage Repayments
Repayments are usually the same terms as residential mortgages, however the interest rates you will repay on a commercial mortgage may be considerably higher as the properties are seen are as higher risks. Before contacting a commercial mortgage lender, it’s best to use a UK calculator here to find out how much the mortgage for your business will likely be and if you can afford it. Depending on whether you are self employed or a limited trading company, as with getting a residential mortgage, a broker will be able to advise you exactly which accounts and which proof of income you will need to provide and for how many years, usually they will look at the past three years. As said previously, each case and application will be looked at individually to assess whether or not they think it is feasible. Either way, they will need to establish whether your business has grown over those years or at least show stability so they know warrants getting a property to use for business purposes. Limited Company Directors may sometimes need personal guarantees to be given along with their applications, so can be harder for them in this instance, however the mortgage broker will be able to advise you on what is required. This is where the difference come in from that of getting a residential mortgage, you will just benefit from a more favourable tax treatment rather than if it were for personal reasons.
You can choose whether you would like fixed or variable rate mortgages as you would for a residential mortgage, although the majority now that are given are on variable rates. Alongside the property valuation, they may even do a valuation of your business and carry out a credit score of the company, so whether a sole trader, partnership or limited company, all will be assessed on the business by looking into that particular business in detail. It’s always best to use a commercial mortgage broker vs. contacting a High-Street Bank such as HSBC Commercial Mortgages as they will be able to factor in other elements such as time to obtain the mortgage, additional paperwork and hurdles which may need to be considered. After all, a lender could be fractionally cheaper than another, but if it takes too long to get approval, you might lose your desired property or if you’re looking to move again in a few years, exit fees could make the deal less attractive.
Once you have been approved for the mortgage and you are happy with the interest rates, repayment options etc, you will see that it will be a huge asset for your company to also have a property on the portfolio and you cannot go wrong with investing into property. You may even be able to lease some of the space of the property to another business and already have an income to pay towards (if not all) of your monthly mortgage repayments. You would need to check with the mortgage lender if this is alright for you to do, but should not be a problem for you as most are quite happy to let businesses do that. Contact a mortgage broker today such as Mortgagearrangers.co.uk who will be able to help you get a commercial mortgage.