Glossary of Terms
Our specialist brokers explain common commercial mortgage terms
To help you fully understand commercial mortgages, our experts have compiled a glossary of terms. To learn more or for a clear explanation of any term you come across on our website, please contact us today on 01202 937880.
A commercial mortgage is a loan used to buy or remortgage a commercial premise.
Owner occupied commercial mortgage
Owner occupied commercial mortgages are similar to commercial mortgages, but the applicant of the loan intends to operate their business from the purchased property. They often have better terms than other types of mortgage, a higher loan to value and lower interest rates for example, as lenders see this loan as low risk.
Commercial investment mortgage
A commercial investment mortgage is a type of loan that is used to buy or refinance a commercial or semi-commercial property that is let to tenants. Many investors see a better return on their money from renting commercial premises than a standard building society savings account.
Loan to Value (LTV)
LTV is the difference between the amount borrowed and the value of the property and is often expressed as a percentage. It’s used by lenders to determine mortgage interest rates and products they are willing to offer the borrower.
When you take out a mortgage, your lender will charge you interest, which is a fee for the loan, on top of the repayments of the value of the loan. Interest rates vary as they are based on a number of factors including the Bank of England base rate, your LTV and credit history. They can be fixed rate, which means the interest charged will be the same for a set period of time, variable rate, charged at the lenders discretion, and tracker rates which, as the name suggests, tracks the base rate of the Bank of England and can go up or down.
The mortgage term is the amount of time, usually defined in years, between the applicant receiving funds and when the loan has to be paid back in full to the lender and the expiration of the agreed conditions of the mortgage.
This allows businesses to borrow money against the amount their customers owe on unpaid invoices to help improve cash flow, pay employees and suppliers and reinvest. The lender will charge a fee for the amount borrowed which is typically a percentage of the invoice amount.
Buy to let mortgage
A buy to let mortgage is a loan given to an applicant wishing to buy a property with the intention of renting it to another business.
Unsecured business loan
Unsecured business loans are loans that are not secured against assets such as property or equipment and are a great, straightforward option for businesses that have few or no physical assets but need an injection of cash.
Interest only mortgage
An interest only mortgage is a loan where the borrower only pays the interest charged for some or all of the term. This means your repayments will be lower but because you aren’t paying back the value of the loan, you will still owe the same amount of money at the end of the term that you originally borrowed.
FC Funding are a leading commercial broker and mortgage lender, sourcing the very best deals on the market that are tailored to the individual needs of our clients. To learn more about how our mortgages can help boost your business, please contact our experienced team today on 01202 937880.