Commercial mortgages, sometimes referred to as business mortgages are mainly for business owners who are looking to buy property or land for commercial use.

At some points, many grown businesses usually look for a new workspace or look to expand beyond their existing business property. It can often be the right course of action for business owners who are looking to avoid increasing rents, or maintenance and management fees. Due to the sheer variation of land and premises, commercial mortgages tend not to be pre-set products in the same way that residential mortgages are, although they do stick to the pan-European Mortgage Credit Directive, which covers both residential and commercial mortgages.

As a commercial mortgage is any loan secured on property which is not your residence, buy-to-let mortgages are a special type of commercial mortgage as well. If you’re planning on buying a property to rent out for extra income, you’ll need a commercial mortgage.

Types of commercial mortgages:

There are a number of commercial mortgage types available, depending on your requirements. These are:

· Owner occupied: For when you will be using the property as the trading premises for your business

· Residential buy-to-let: For when you’re building a portfolio of properties to rent out for residential purposes

· Commercial buy-to-let: For when you’re investing in a commercial property to lease to other businesses – as in a shared office complex

The duration of a commercial agreement can run from 3 to 25 years. While the interest rates on commercial mortgages will often be greater than those on residential properties, they still offer better value for money than more conventional business loans.

Understanding the challenges presented in securing a commercial property mortgage requires working with a mortgage adviser that will provide answers to any issues you may have. At Robi Finance Ltd, we can provide you with everything you need to make a considered decision, helping complete all the necessary documentation to support the success of your application.

How can I get a commercial mortgage?

There are many different options available, depending on your lender. Finding a commercial mortgage can take a bit of time and detailed research, but you should find a lender that meets your particular needs. A mortgage broker can help at this stage.

Before you start your search, remember that you’ll need certain documents in order to apply successfully. Check that you have:

• Recent bank, liability and asset statements records
• Performance figures (both current and projected)
• The details of your partners and directors
• Business finances and trading figures for the last three years
• Value of assets and cash flow
• Type of mortgage required (owner-occupied, residential buy-to-let, commercial buy-to-let)
• Level of deposit available (many mortgage providers offer only up to 75% of the total value)
• Lease and tenancy agreements
• Projected income of the business

What are commercial mortgage terms?

Terms can vary. Some repayment plans have three-year terms, while others may offer a term of 25 years; the average is around 15 years.

Terms are often dictated by the size and value of the property, or the available deposit you have, with many lenders offering commercial mortgages at a variable rate.

You’ll need to watch out for complex clauses or directives where there are greater risks to the borrower – if you have any doubts or you’re unsure of the contract wording, your mortgage broker will be able to help.

How much deposit do you need for a commercial mortgage?

Deposits can vary, but commercial mortgage deposits tend to be around 30% of the property value. The type of business you run can also affect your deposit. Some lenders may ask for more money if they consider your business to be more ‘high risk’ – for example, if it’s a restaurant or a bar.

What is a semi-commercial mortgage?

A semi-commercial mortgage is a mortgage for a property that is half business and half residential, such as a flat above a shop or pub, or part-converted offices and flats. These types of properties often fall outside standard residential or commercial mortgage lender terms, so they need a unique mortgage product.

Rates vary, but lenders tend to favour applicants who have experience in running or letting commercial properties. People who have owned more than one buy-to-let property for a minimum of two years also tend to be given good deals.