Written by Richard Farnworth

Applying for a commercial mortgage on a business premises can be a huge step for any business, whether a one man band or a larger organisation.

It is vital that any commercial mortgage you take out as a business, matches your needs in the long term as well as the short term.

If you’re thinking of taking out a commercial mortgage, you can receive expert advice from our dedicated solicitors by calling us on 01282 695 400.

What are the common loan values for commercial mortgages?

If you are taking out a commercial mortgage, the interest rates can often be linked to the Libor rate movements. However, there are some fixed rate mortgage options available.

The loan to value rate for a commercial mortgage is also commonly much lower than that for a residential loan.

Homebuyers can now borrow anywhere up to 95 per cent of the value of their property, however a business is more likely to be looking at around 60 to 70 per cent.

What information do you need to provide?

Just like applying for a residential mortgage, you will be asked to supply a variety of financial information in order to secure a commercial mortgage.

This will often include:

  • 3 years of published accounts
  • Information about the background of the business
  • Information on the business owners
  • A case for how payments will be met

Will the lender require a director guarantee?

In some cases, a lender may require a personal guarantee from each of the directors or business owners. They may also request that this guarantee is supported by a charge over the director’s private residence.

A lender may look for this extra security when providing a loan as it ties in the director or business owner on a personal basis.

Are there any extra fees involved?

There are additional costs that you will need to consider when taking on a commercial mortgage. These can include:

  • Arrangement fees (normally between 0.5 per cent and 1.5 per cent of the loan value
  • Valuation fees (the cost of the lender carrying out a survey to establish the value of the property)
  • Redemptions penalties (a fee to be paid to the lender if you pay off the mortgage before the agreed term)

Do you need a solicitor when taking out a commercial mortgage?

When taking out a commercial mortgage, you will be committing to a significant financial investment.

It is vital that you have the right advice from an experienced solicitor to ensure that your commercial mortgage meets the needs of your business.

The dedicated team at Commercial Matters can help you prepare documents for the commercial mortgage and carry out the necessary searches to ensure you receive funding as soon as possible.

How to contact the experts at Commercial Matters

If you’d like to talk directly to one of our legal experts, call us now on 01282 695 400.

Or, if you’re unable to speak to us right now, you can arrange a call back by completing our online enquiry form.