August 15, 2022

What is a Commercial Mortgage?

Just as commercial properties come in all shapes and sizes, so do commercial mortgages. Commercial mortgages, also known as business mortgages, let business owners secure finance to buy property, or land, for their business use. Typically to help them expand as they need more space. The mortgage can used to acquire, refinance, or redevelop the property.

What Properties Qualify for a Commercial Mortgage?

  • Retail store or centre
  • A Restaurant
  • An Office
  • A care home
  • A Guest house or Hotel
  • Warehouses

Who Can Get a Commercial Mortgage?

Commercial mortgages are typically used by business owners who want to own the new premises where their business will be based. Investors can also use a commercial mortgage to buy a property to lease to another business, such as warehouses and light industrial units.

Buying vs Renting a Property

  • Control over the costs of the business.
  • Control over the infrastructure.
  • Stability.
  • A solid long-term investment.

Additional Considerations

  • Commercial properties can be purchased in a number of different ways: personally, by a company, or as a Special Purpose Vehicle (SPV) specifically set up to purchase the property.
  • Consider how you want to hold the property as that will have accountancy and legal implications.
  • As with most business funding, commercial loans tend to be more expensive than personal mortgages. It’s important to consider the different types and features of commercial finance available
  • If you are looking to rent a commercial property to a third party, lenders will require clear evidence of your ability to cover the repayments, plus a margin when lending for rental property. Some lenders may require that the property is already rented out, for example. Such loans are referred to as a commercial investment mortgage.
  • Commercial mortgages are available to purchase an office, or premises to conduct your business from. This is referred to as an owner-occupied commercial mortgage
  • As with any property purchase please bear in mind the additional costs involved, such as legal, estate agents, business rates, insurance, maintenance, annual checks and certifications, and legal.

Provide can help with difficult considerations that have legal and accountancy implications. The platform supports your Commercial Mortgage application with Financial Budget templates to help plan for long-term payments and additional costs.

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