Commercial Buy To Let Mortgages

Use it to purchase or refinance a commercial investment property

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Loan Amount

£100k-£10m

Loan Term

Up to 25 years

Time to Funds

As Little as 45 days

Interest Rate

From 6.5%

A commercial buy to let mortgage to help you build your investment portfolio

Investing in commercial or semi-commercial property can be a great investment. As you’ll know, every situation is unique which is why there is a commercial buy to let mortgage to match every circumstance.

Commercial Buy To Let Mortgages: What You Need to Know

A commercial buy to let mortgage is a particular type of business loan, where the funds lent are secured against a commercial property. If you plan for your business to trade from the property then you’ll need a commercial mortgage, and if the plan is to let this out to a third party tenant then you’ll need a commercial buy to let mortgage (also know as a commercial investment loan). The mortgage can be used to purchase the property, to refinance an existing mortgage, or to release equity from the property.

If the property is mixed use (residential and commercial), such as a shop with a flat above, then you’re in the right place as this would be covered by a commercial buy to let mortgage.

What is a Commercial Buy To Let Mortgage?

A commercial buy to let mortgage is a loan where the debt is secured via a business property. The property will be rented out to a commercial tenant with a suitable lease and it’s this rental income which will repay the mortgage each month.

Commercial mortages can be taken out directly in the business name (whether you’re a sole trader, partnership or Limited Company), or it can be taken out under another entity. For example, we often help property investors buy properties in Special Purpose Vehicles (SPVs), which is typically a Limited Company specifically created to buy the property.

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How does a Commercial Buy To Let Mortgage work?

As with any mortgage, a commercial buy to let mortgage tends to be quite long term. Typically, they span between three and 25 years. You’ll need at least a 25% deposit, as commercial lenders will only lend a maximum of 75% against a commercial investment property (and often less than this figure depending on the property type).

Lenders will need to verify that the rental income is sufficient to meet the monthly mortgage repayments, along with assessing you as a property investor against their specific criteria. Often lenders will be cautious about lending to inexperienced investors. Once approved, they’ll send a valuer out to confirm the value of the building and then their solicitors will set about the legal work.

Do I qualify for a Commercial Buy To Let Mortgage?

Commercial buy to let mortgages aren’t available to any would-be investor. All lenders have a strict set of criteria that a property investor must meet in order to be considered for such a loan. The list of eligibility checks that lenders use to decide whether or not to lend include assessments of the property type, demand, tenant and length of lease.

Lenders will be happier lending to experienced investors who can demonstrate that they successfully own and manage other commercial investment properties. This is because owning commercial investment properties is typically more complex than with residential properties.

Lenders will have more or less appetite to lend depending on the type of property. You’ll see this play out as lenders offer higher loan to values for sectors they like, and lower loan to values for sectors they are more cautious about.

The strength of tenant has a significant impact on how a lender views an application. A start-up tenant won’t be particularly favoured, while a long-established tenant with a track record will be welcomed.

Lastly, the existing or proposed lease will be pivotal. Negotiate a longer lease with no break clauses and you’ll be in a stronger position raising finance. Short leases, or tenant break clauses, can cause some issues.

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How much deposit do I need for a Commercial Buy To Let Mortgage?

Commercial buy to let mortgages require a hefty deposit, and that should be a major consideration before the mortgage hunt begins. The amount that you’ll need varies, depending on what the lender thinks you’ll be able to afford, and what type of property you’re hoping to buy.

Usually a commercial buy to let mortgage deposit will fall between 25% and 50% of the overall purchase price. Of course, many investors hope to pay the smallest possible deposit, so it’s well worth shopping around to establish the amount that different lenders are able to offer. In some cases you may be able to fund the entire purchase price by offering a second property as security to a lender.

How quickly can I get a Commercial Buy To Let Mortgage?

Arranging a commercial buy to let mortgage is a complicated business, and as you might expect there’s a fair amount of paperwork involved. We’re often asked how long it takes to arrange a commercial buy to let mortgage, but there’s no simple answer to this one.

If you, your lender and your solicitor pull out all the stops and arrange everything as quickly and efficiently as you possibly can, you’ll likely be looking at a time frame of 4 to 8 weeks. Of course, more complex mortgages can often take far longer than this. If you need to complete on this finance in under 4 weeks you’ll need a bridging loan.

Make sure everything runs smoothly by ensuring clear, fast communication with your lender, and keep all your paperwork to hand to help the process along. Using an experienced broker can really help to keep everyone moving and deal with any hiccups along the way.

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