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Commercial Mortgages

 

We are a leading commercial mortgage broker, helping businesses across the country to find a mortgage or remortgage solution that suits their budget and repayment requirements. We'll work with your team to find a mortgage that is appropriate for your business and premises, guiding and advising you every step of the way.

What is a Commercial Mortgage?

A commercial mortgage is used for the purpose of purchasing or remortgaging commercial premises. You can also use a commercial mortgage to purchase investment properties. Commercial mortgages are provided by standard high street lenders, challenger banks and other financial institutions.

Repayment options are similar to those found in the residential market, but there’s usually a slightly higher interest rate. This is because commercial mortgages are perceived as higher risk. As well as the usual valuation, arrangement, and legal fees, there can be extra associated costs, so it’s worth seeking advice from our team of experienced brokers. We have an in-depth knowledge of the market, relationships with lenders, and the know-how to find the right commercial mortgage for your business. 

Find out how our commercial mortgage brokers can help source the ideal solution for your business: contact us on 01202 937880 today.

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Time speed up shot of a uk high street

Types of Commercial Mortgages

Generally speaking, commercial mortgages can be used for the following three purposes:

Owner-occupied

There are two business situations that call for owner-occupier commercial mortgages. Either a company wants to purchase its current premises or a new premises to move into.  

Commercial buy-to-let

Commercial mortgages can be used to secure commercial buy-to-let properties. For example, if you wanted to purchase a manufacturing facility via your company but let it out to another business, a commercial mortgage would be the way to go about that. 

This type of mortgage is similar to residential buy-to-let, except that the lender will look at different factors as it’s typically harder to rent out commercial properties. 

Residential buy-to-let

Commercial mortgages are commonly secured in order to purchase residential property to let out, usually by professional landlords and buy-to-let limited companies. 
 

Commercial Investment Mortgages

Commercial investment mortgages are given by lenders to business owners looking to invest in or remortgage a commercial or semi-commercial property that is occupied by tenants. The fees and rates are slightly higher than standard commercial mortgages that are given in owner-occupied cases. 

Semi-Commercial Mortgages

Semi-commercial mortgages are given when a property has both a commercial and residential element - such as a shop with a flat above it. Semi-commercial mortgages are usually given out by a commercial mortgage lender - so if the property is occupied by tenants, you would need to look into a commercial investment mortgage. 


Compare commercial investment mortgages

FC Funding is a leading provider of commercial investment mortgages. We use our established connections with high street and online commercial lenders to find our customers the best rates. You'll be able to compare commercial investment mortgage rates, fees and T&Cs - and benefit from mortgage advice from our expert team. 

If you're looking to compare commercial investment mortgages, give the FC Funding team a call on 01202 937880 to discuss your circumstances. 


Commercial Mortgage Eligibility and Lending Criteria

Banks will consider the following when choosing to make funds available for a commercial mortgage:

  • Loan-to-value
  • Credit Scoring
  • Serviceability
  • Sector Experience
  • Property Type
  • Sector Type
  • Interest Rates

Certain lenders will accept outside income if the serviceability of the commercial mortgage is tight.

Other key factors lenders will take into consideration are:

Trading History

Lenders will want to know that your business can afford to repay the mortgage. That’s why your trading history is important and limited companies will need to provide a minimum of two years of filed accounts (or three if they wish to be eligible for the high-street banks). 

If yours is a new business and you’re looking to purchase your first premises, you’ll need to have a significant lump sum to put in. Loan-to-value ratios for new businesses with no trading history will typically be up to 50% of the purchase price. 

Professional landlords looking to secure a commercial mortgage for residential rental property will usually need to demonstrate at least a year’s experience in this area. 

Intended Use of Property

Commercial mortgages vary, and how you plan to use the property will affect the amount you can borrow, as well as the interest you’ll pay. 

Owner-occupied businesses like offices and shops normally get a maximum loan-to-value of around 80%. However, if you decide to split the building into smaller units and lease some of these, that changes your business from an owner-occupied one to a commercial buy-to-let. In this scenario, maximum LTV drops to 75%, while your interest rate goes up. 

The Location of your Commercial Property

Getting a new commercial mortgage may be tricky if your company already owns a lot of properties in the same area. This is because of something called the ‘concentration limit’. The idea behind this is that if the market in your area is struggling, you’ll be in a much more vulnerable position than if you had a portfolio of properties spread across the country. 

Also, while some lenders will consider commercial mortgage applications without planning permission, it’s worth noting that planning permission is important as it has implications for the future profitability of the site. 

Ultimately, there’s no one-size-fits-all approach to commercial mortgages, and lenders will look at applications on a case-by-case basis. Therefore, even if you don’t meet all the criteria on paper, putting forward a strong business case to the right lender may secure you the commercial mortgage you’re looking for. That’s where we can help. Get in touch with us on 01202 937880 to get started. 

Why Use a Commercial Mortgage Broker?

There are a lot of lenders in the market and each have their own preferences when it comes to which assets can be used as collateral. That’s why working with an experienced commercial mortgage broker like FC Funding can help you to find the right lender to suit your business.

The landscape of commercial borrowing can be a tricky one to navigate, as mortgages are complex and regulated products. At FC Funding, our experts have many years of experience in sourcing the best mortgages for our clients’ business needs. We have access to and a comprehensive understanding of the whole market, including all the latest innovations and products, as well as great relationships with lenders. 

We can use our expertise to put forward the very best possible case for your business, highlighting all the important things there may not be space for in your application paperwork. 
 


Frequently Asked Questions

 

A commercial mortgage is used to purchase or re-mortgage a property for commercial purposes. As a leading commercial mortgage broker, FC Funding’s experienced team will help you find the appropriate option for your business.

As commercial mortgages are used for business purposes, limited companies, SPVs, LLPs, partnerships and sole traders can apply for a commercial mortgage (although this will vary between lenders). In some circumstances, those with impaired credit and business start-ups may also be able to apply for a commercial mortgage.

You’ll pay a higher interest rate on a commercial mortgage, as they’re considered a higher risk to lenders compared to a residential mortgage. Even if you have a bad credit rating, you should still be able to apply for a commercial mortgage, but you’ll probably have to pay a higher interest rate to reflect the risk the lenders will take.

Typically, due to the higher risk profile, commercial lending is more expensive than residential lending. Factors affecting the interest include:

  • The LTV ratio
  • Business credit history
  • Trading experience
  • Business profitability

No, as repayment commercial mortgages are available. However, interest only commercial mortgages are available for borrowers who prefer to repay their loan in full at the of the month (rather than making monthly capital repayments).

Average commercial mortgage interest rates fall between 3.5% and 6%.

Yes – we are a credit broker (and not a lender) and we are authorised and regulated by the Financial Conduct Authority (FCA) with FRN number 674204. We treat our customers in compliance with the strict criteria laid out by the FCA, whose primary aims include the protection of consumers.

Yes – when you assume a commercial mortgage, your business takes on the existing mortgage of the property it is purchasing.

Yes – the interest on your commercial mortgage is tax-deductible. This means if your property increases in value, your capital could also rise.

There are many options available for those looking for finance for commercial property and it’s important to choose the right option for your business. FC Funding offer a wide range of commercial property finance products and our services can be tailored to your specific requirements.

Minimum loan sizes typically start at £20,000 and can range anywhere into and beyond £25 million (subject to criteria). For more information click here.

Commercial mortgages are typically offered with a maximum loan to value ratio (LTV) of 70-80% for an owner-occupied mortgage or 75% for commercial investment. This means committing to a deposit of between 20% and 40%, depending on the risk level.

With FC Funding, however we can offer up to 100% LTV commercial mortgage financing. Contact FC Funding to learn more.

The fees and charges for commercial mortgages vary across markets, however as a general rule-of-thumb you should expect the following:

  • Application fee
  • Valuation fee
  • Arrangement fee
  • Legal fees
  • Exit fee
  • Administration fees - Any additional costs charged by either lender or broker

With FC Funding, however we can offer up to 100% LTV commercial mortgage financing. Contact FC Funding to learn more.

Yes, provided the residential property is used for commercial purposes e.g. to generate rental income as a landlord.

This will vary between lenders but there are a range of property types such as:

  • Shops
  • Hotels
  • Offices
  • Factories
  • Warehouses
  • Restaurants
  • Pubs
  • B&Bs

This will vary between lenders but as a general rule-of-thumb you should expect to have to provide the following documents:

  • Projected business income
  • Ability to pay the deposit and source of funds
  • Income (full accounts of trading business) credit and assets
  • 2 years’ trading accounts
  • Last 3 months’ business bank statements
  • Proof of ID (certified copy of passport or driving licence)
  • Proof of residency (utility bill or bank statement)

Other Factors to Consider When Buying Commercial Property

There are many additional factors to consider when purchasing commercial property, which is why it can be valuable to speak to a commercial mortgage expert.

Additional Fees

It’s easy to forget to factor in the additional fees associated with purchasing a commercial property, such as valuation fees and stamp duty (land tax payable on non-residential properties over £150,000).

Fixed Rate versus Variable Rate

Fixed rate mortgages ensure that your monthly repayments do not increase. There are also variable rates which can change, or “blended” rates (a mixture of the two). It’s important to seek advice on the best option for your business, as this decision will determine not just your monthly payment amount, but also how much equity you’ll accrue in the purchased property (and how quickly).

Why should I choose First Commercial Funding?

FC Funding is one of the leading commercial brokers and commercial mortgage lenders in the country and our wide-ranging expertise means we can guarantee a tailor-made package to suit your requirements. We have helped hundreds of business owners all over the UK find the right funding to grow their company – find out more from our testimonials.

Commercial Mortgage Glossary

  • Buy-to-let (BTL): a property that’s purchased with a view to letting it out to tenants
  • Debt service coverage ratio (DSCR): the ratio of your monthly repayment amount versus your overall cashflow position
  • Loan-to-value (LTV): the ratio of the amount you want to borrow versus the value of the property
  • Standard Variable Rate (SVR): the variable interest rate of a mortgage as determined by the mortgage lender, rather than the Bank of England base rate
  • Forced Sale Value (FSV): the asking price you could receive if you had to sell the property as soon as possible
  • Open Market Value (OMV): the asking price you could receive if you were able to wait for a few months to sell the property. This is usually higher than Forced Sale Value, because you have time to wait for the best offer to come in

Commercial Mortgage Brokers You Can Rely On

Whether you're looking for somewhere to run your business or a holiday let, our commercial mortgage brokers not only source a mortgage with rates that suit you best but will also work with your team to ensure that the entire process runs smoothly and on schedule.

Commercial business mortgages can have a positive effect on asset appreciation and over the term of your loan, it is likely that the value of the building will increase.

As an experienced commercial mortgage broker, we can help you achieve your goals with up to 100% LTV achievable with additional security and the most competitive rates guaranteed. Adverse accounts and credit history problems can also be accounted for.

Due to the fact that this is an ever-changing marketplace, it is always worth calling First Commercial Funding to discuss the possibilities of a loan being accepted and to ascertain the appetite of the lenders.

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