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Explaining the Different Types of Commercial Mortgage


Commercial mortgages are loans that allow you to purchase property, either for the purposes of your own business or to let. The commercial mortgage market can be complex, however, there are two main types of commercial mortgage that we will cover below.

Commercial investment mortgages

If your business wants to purchase a property in order to rent it out, then you will need a commercial investment mortgage. If this is a residential property, then you will specifically require residential buy-to-let mortgage, whilst if it is a commercial property, you will need a commercial buy-to-let mortgage. Lenders usually offer loans of 75% LTV.

In comparison to owner-occupied mortgages, lenders have different criteria that they follow in order to determine loan value. For example, rental income and the quality of the tenants (how likely they are to pay on time). The more tenants there are, the less perceived risk by lenders, which reduces the likelihood of your application being rejected.

Owner-occupied mortgages

If you wish to purchase a building from which to operate your business, then you will require an owner-occupied mortgage. This is beneficial, because you will own an asset that will (hopefully) appreciate in value over time.

These types of commercial mortgage are generally looked upon more favourably by lenders than commercial investment mortgages, as there is less perceived risk due to a lack of third party and rates. Loans are generally available to the value of around 70-75% LTV, with a few exceptions, and are suitable for most types of business and industry.

FC Funding are leading commercial finance brokers, and have helped hundreds of clients secure the best possible commercial mortgage for their business. To find out more about our services and how we can help, call 01202 937880.

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