If you’re a budding entrepreneur looking to build a successful business, sooner or later you may need to buy a property, in which to base your operations.
Business loans can offer a great start, but as the prices of properties are high, you may need to find another way to fund the purchase of a commercial premises.
Find out more about Commercial Mortgages and how they work.
A commercial mortgage is most often thought of as a loan to purchase commercial premises. There are two main types of Commercial Mortgage;
It is also possible to take out a commercial mortgage to renovate existing business properties.
As the mortgage is secured against the business premises, the lender has the legal right to repossess your commercial property, should you fail to pay back the loan.
The mortgage can be taken out on a repayment basis, meaning that you will pay both the capital and interest of the loan amount in monthly, quarterly, or yearly instalments. This payment method is designed to aid with cashflow, helping your business stay afloat whilst the commercial mortgage is paid off.
You can also choose to pay a variable rate of interest, based on the Bank of England base rate or LIBOR rate. You can also choose to repay on an interest-only basis, using your business’ profits to repay the loan, in full, at the end of the mortgage term.
You may also be permitted to ‘roll-up’ the interest and add it to the capital amount borrowed, to lower your interest repayments in the short term.
Typically, a commercial mortgage can run from 5-30 years and lenders will permit you to borrow up to 80% of the property’s value.
Please note: If you are seeking out a commercial loan for a new business, you may only be permitted to borrow 50% of the property’s value.
In terms of the rate of interest you pay for this mortgage, the valuator and lender will give you a figure based on their own calculations. You may be put on a higher interest rate if your business is viewed as not being the most profitable.
Commercial Mortgages work very differently from residential mortgages, as the assessment criteria are highly individualised, affecting both the amount of money you can borrow as well as the interest rate you will subsequently pay. Enlisting the help of an independent financial advisor can help you find the best commercial mortgage for your needs. Speak to a mortgage broker now, they can offer you free, no-obligation advice and a quote.
My biggest concern was finding a mortgage with no strings attached. My options were clearly explained to me and I felt confident about the decision. Alice Silverman, Stoke-on-Trent
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THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.
IF YOU ARE THINKING OF CONSOLIDATION EXISTING BORROWING YOU SHOULD BE AWARE THAT YOU MAY BE EXTENDING THE TERMS OF THE DEBT AND INCREASING THE TOTAL AMOUNT YOU REPAY.
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