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A commercial mortgage - sometimes called a commercial property mortgage or loan - is quite simply a mortgage that’s secured against a commercial property. Commercial properties are properties that house businesses or operate as investments, like an office building or block of flats.
You may require or benefit from a commercial mortgage if you’re a:
Properties and land often used as security for commercial mortgages include:
Although some high street lenders do offer commercial mortgages, this is only a small sample of what’s out there. There are a lot of commercial mortgage lenders that aren’t available on the high street, like centralised lenders and private banks. Some won’t even consider applications directly from borrowers.
This means it’s likely you’ll miss out on better deals and more competitive rates if you don’t use a commercial mortgage broker.
John Charcol are an independent, commercial mortgage broker, which means we have access to every commercial mortgage lender on the market. We can find you a deal that’s actually worthwhile.
What’s more, we can consider your portfolio of properties as a single package, which can give you access to the best commercial mortgage rates across all your properties.
With over 45 years of service, we've seen it all. We can save you money, time and make buying your property easy.
We have over 1,500 5* reviews on reviews.co.uk, so you can feel confident that your mortgage is in the right hands.
We work around your schedule to help you arrange a mortgage that suits your circumstances, no matter how complex.
When you phone us, you can either arrange a phone appointment with your adviser or a face-to-face meeting – whatever suits you best. Your adviser will ask you some questions and, once they have all the information they need, they’ll go away and find you the commercial lender for your circumstances and future needs. They’ll also arrange a follow up call to present you with what they’ve found. It may require more than one conversation to gather all the right information, depending on situation and requirements.
Once you’re happy with their recommendation, the adviser will approach the lender to gain an initial/verbal DIP (Decision in Principle) which is basically a promise from the lender that they’ll loan you money on the condition that the information you’ve provided is correct and subject to a valuation of the property. The conditions outlined in the DIP will be based on a conversation you have with the adviser, where you explain your situation and what you want to achieve.
After the lender has agreed your scenario, you’ll be in a position to make an offer on a property or move forward with the refinancing.
Following the acceptance of your offer or decision to proceed with refinancing, we’ll send you some information that explains all the documents we need to submit to the lender. You’ll be assigned a client relationship manager who’ll check and submit certified copies of your documents; they’ll liaise with both you and the lender. Your adviser will then submit the fully packaged mortgage application.
The lender will underwrite your application; this basically means they’ll verify the information you’ve provided and review all your documents for themselves. They’ll also instruct a valuation for their purposes on the property that’s being used as security to make sure there are no significant problems with the property and that it meets their requirements.
If the lender is happy with everything they’ve found, they’ll send you a mortgage offer. They’ll also send us a copy.
After you’ve accepted your mortgage offer, you’ll go through the legal part of the process, known as conveyancing. This is where the solicitors/conveyancers draw up contracts and organise the actual, legal purchase of the property/refinancing. If buying, you’ll also need to arrange buildings insurance at this stage, making sure it’s in place from exchange.
If you’re buying a property, your conveyancer/solicitor will exchange contracts with the seller’s conveyancer/solicitor; it’s at this point that you would put down your deposit and be legally bound to the property. The purchase will complete when the money is transferred on an agreed-upon date. If you’re refinancing, then your conveyancer/solicitor will set a date to draw down the funds and pay off any existing lender(s) once the mortgage offer’s released.
A commercial mortgage lender considers both the income of the borrower and the business of the tenants when assessing an application.
If you’re a business owner-occupier, you’ll need to provide:
If you’re a commercial property investor, you’ll need to provide:
If you’re a residential property investor, you’ll need to provide:
5 years is the length of the average commercial mortgage.
The minimum deposit for a commercial mortgage is 25% but applicants often put down a little more, often between 25% and 40%.
These can vary from smaller commercial loans and trading businesses where rates can be from 2% up to full commercial development loans that can go up to 12% in extreme cases.
Commercial mortgages work in the same way as residential mortgages and are available on both repayment and interest-only bases. Nonetheless, there are a few differences.
The key differences between commercial mortgages and residential ones are:
You can live in a commercial property if it’s a mixture of commercial and residential use.
You can’t take out a residential mortgage on a commercial property. Commercial properties are riskier for lenders, which is why they require a specific type of mortgage. Taking out a residential mortgage on a property you intend to use for commercial purchase is classified as fraud and will put your property at risk of repossession.
If a property is a mixture of commercial and residential use, then a residential mortgage lender will refuse to lend on a property of which more than 40% is used for commercial purposes.
You would only be able to convert a commercial mortgage to a residential one if the use/classification of the property changed from commercial to residential. You would need to fill out a small planning application if you wanted to change the use classification of a property.
Securing a loan on multiple properties or your portfolio is called cross-charging and is quite common for trading businesses in multiple locations. We can help you arrange this kind of commercial mortgage.