A commercial mortgage is a loan that is used to purchase or re-finance the property that a business trades from. However, the term is sometimes used more generically to describe any loan secured against a commercial property.
Commercial mortgages can be for any type of commercial-use property – industrial units, retail shops, offices, surgeries, restaurants and so on. Where the property has both commercial and residential elements (mixed) it is likely to be assessed by the lender as a commercial mortgage.
How much can I borrow?
Depending on the sector some lenders will lend up to 75% loan to value (with the remaining 25% of the purchase price required to come from savings). If you have additional properties and the business can afford it, then you can be a little bit clever and find funding up to 100% of the value of the property.
Loans tend to be over a longer term – generally 10-25 years – much like a personal mortgage, and will be secured, meaning the lender will take a legal charge over the property.
Ownership structures
While simple commercial mortgages are owned in the name of the business that trades there, many business owners choose to purchase the premises in their personal names or a separate property company and lease it to the trading company. This can sometimes mean more can be borrowed, as well as having potential tax advantages and legal protections for the business owner. We recommend seeking advice from an accountant and solicitor to work out the best option.
