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To apply for a commercial mortgage, it may be possible to apply directly to a lender but most borrowers will work with a specialist commercial mortgage broker.
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Commercial mortgages fall into two categories: owner-occupied commercial mortgages, for business owners who run their business from their own premises and mortgages secured on commercial property for investment purposes. Commercial mortgages are commonly used by business owners who want to own the premises where their business operates from. However, this is referred to as a residential buy to let mortgage as opposed to a commercial mortgage. If it was a flat (residential) over a shop (commercial) then it is termed as a semi-commercial mortgage. Commercial mortgages differ from standard business loans and come with unique requirements for the borrower. Below are some important tips worth considering when trying to secure a commercial mortgage. Commercial mortgages are not at all similar to business loans.
Prepare for the Application Process • Applications for commercial mortgages are typically reviewed on a case-by-case basis. To apply for a commercial mortgage, it may be possible to apply directly to a lender but most borrowers will work with a specialist commercial mortgage broker. • During your application process, a lender will carry out several checks that will vary from lender to lender, ranging from legal checks to assessments of your financial health in some cases. The application process is when the broker submits the application and will apply for a decision in principle. The only check a lender will conduct is a credit check. The underwriter will review all the documentation submitted – no legal checks are done by the lender- this will be done by the lenders Solicitor.
Making sure you understand the process and provide the necessary documents and supporting information as needed is important for getting your commercial mortgage approved in a timely manner. This is a true statement – but the process has not been explained well in the previous paragraph. The process is: Apply for a decision in principle – and if successful then…. Submit a full mortgage application together with: Personal bank statements, pay slips and P60 if employed address ID, photo ID, accounts, SA302s, Tax Year Overviews if self-employed. Business bank statements. Pay any lender application or admin fee and a valuation fee. Valuation takes place An underwriter assesses the case A mortgage offer is provided Solicitors are instructed Completion takes place
Review the Market • It may be tempting to choose a lender you have already worked with in the past, but with new mortgage products entering the market regularly, it often pays to check all possibilities at the time you need a new mortgage. This is where commercial mortgage brokers play an important role. • Some may think that products are relatively consistent across the market, but the reality is that loan terms can vary substantially. A broker can ensure all suitable options are presented to you before you commit to an agreement (this is applicable to a business loan – there is no agreement with a mortgage just an “offer”).
Consider Repayment Terms Carefully • A commercial mortgage is more complex in nature than a residential mortgage or even a business loan. It’s always a good idea to carefully consider the kind of mortgage you choose and ensure the repayment terms make sense for your business.
If you are unable to make your monthly commitments, you risk damaging your credit rating. A lender may eventually repossess your property too if you are in default. • In some cases it is worth checking your credit rating and seeing if there is a way to improve your situation before applying. This could result in more favourable loan terms with lower interest rates. • Add Extra Due Diligence For Specialised Businesses • Lenders will likely apply more scrutiny to your application if you intend to purchase a property and operate in a specialised industry. • For instance, while there are many lenders willing to offer you a loan for purchasing a property to use as a standard retail unit, fewer will do so for businesses such as betting shops.
Work With Experienced Mortgage Brokers • Business owners should make it a priority to only work with experienced mortgage brokers. As well as finding you the best commercial mortgage deal, they can offer invaluable advice during the application process.
Contact us Email Id: - mc@exelfinance.co.uk Website:- https://www.exelfinance.co.uk/ Tel:- +44 (0) 1613271837
