When are commercial mortgages utilised?
Commercial mortgages in most cases take over where business loans conclude. Business loans as much as £25,000 are generally unsecured, but for larger sums finance companies require security in order to reduce the uncertainty to themselves. Because of the legal and administrative expense of getting security on commercial building it is generally thought to be uneconomic to borrow less than £50,000 in this manner, and several lenders need a minimum of £75,000 or more.
What may be given as security?
More often than not, lenders take the property you are actually buying as the sole security for the loan. Typically 70% of the value of the property, and ask for a cash deposit for the balance of the purchase price. If you are not in a position to pay this cash deposit, you could provide the lender with further security, perhaps an additional property with substantial equity or a charge over alternative assets such as insurance plan or shares
Can I obtain a mortgage loan on a leasehold property?
Typically if the lease remaining is over seventy years, for the majority of lenders, or else you will likely need additional security.
How drawn out are commercial mortgages?
Commercial mortgages are normally from 3 to 25 years. Shorter term finance is also obtainable. This is also known as a bridging loan or property development loan, in which you may have from a few weeks upto 24 months to repay.
Do all of the commercial mortgage lenders have a variable rate?
No, although most of them do. Normally a rate is going to be quoted as XY% over base or LIBOR (London Interbank Offered Rate), and this in residential property terms would be referred to as a tracker mortgage. Fixed rate mortgages are available for amounts less than £500,000, where the lender takes the rate liability themselves; these might be beneficial. But mortgages where the lender moves the risk on to the borrower by using a “Swapping” contract are ideally avoided.
So why can’t I get a definite rate?
The interest rates charged for commercial mortgages and business loans are generally not pre-determined like personal loans usually are. In every single case when an application is made for a commercial mortgage a financial manager reviews it diligently to assess the risk in the proposed loan.
A good deal of relevant information is needed for this decision. The lending manager will probably vary the rate offered to calculate the risk of the loan. More substantial loans having a minimal risk will most likely get the very best rates. Lenders regularly have a risk profile that these companies work to, thus if your loan drops beyond their liability profile it will most likely be rejected.
How much can I borrow at one time?
With regard to owner occupied property, it is posible to achieve a 70-75% mortgage. If it is an investment, the sum you have the ability to borrow will be decided by the letting income proposed by the investment. This will certainly not rise above 65 % of the acquisition price. If purchasing a business which includes goodwill, assets etc the sum available will be further decreased.
What about arrangement fees?
Arrangement fees are usually put into the loan at the time it executes. Few lenders require funds to cover their work in the event that a client does not accept their offer. A commitment fee, which pertains to the overall arrangement fee, might be due at application stage and is non-refundable. Arrangement fees are almost always 1% - 2% of the loan amount.
Property Valuation Charges
Commercial properties valuations are far more varied than non commercial ones. A valuer will certainly be expected to inspect the property and produce a 20 - 40 page report for the lender. In most cases houses are not seen by a valuer these days, which is the reason they are a lot less expensive than commercial valuations. Commercial valuations start at about £550 for a basic case. This is paid to the lending institution just after an initial indicative offering has been accepted.
Expected Legal Costs
You are likely to be required to pay both your own legal costs and those of the lending institution. Property legal costs will vary depending on the complexity or a case. In general, this stands at around £500 for each party.
Why use a broker to secure best commercial mortgage?
It makes good sense to employ a specialist commercial broker who possesses the connections and industry knowledge to secure you the most suitable deal. The broker will have to introduce your scenario to the lenders, therefore you should be sincere and fully transparent in your dealings with your finance broker.
Do not attempt to use numerous brokers at the same time, you may be embarrassed and may end up empty handed. Charles Frank Finance who are registered members of the NACFB can be relied upon to possess Professional Indemnity insurance and to follow a code of practice.