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100% LTV commercial mortgages

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By Pete Mugleston  | Mortgage Advisor Pete has been a mortgage advisor for over 10 years, and is regularly cited in both trade and national press.

Updated: 26th June 2019* | Published: 12th June 2019

Customers in the market for commercial property often get in touch to ask us about the maximum loan to value (LTV) ratio on commercial mortgages.

Many have asked us about the typical cap lenders usually impose, while others have wanted to know whether it’s possible to get a 100 percent business mortgage in the UK and how to go about it.

Fortunately we work with advisors who are experts and can offer you the right advice when it comes to commercial mortgages.

Our guide to 100 percent commercial mortgages aims to answer your questions and many more.

You’ll find the following topics covered in depth below…

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Can I get a commercial mortgage with 100% LTV?

Commercial mortgages are usually offered with a maximum loan to value ratio (LTV)of 70-80% for an owner-occupied mortgage or 75% for commercial investment, which means you would normally need a deposit of between 20% and 40%, depending on the level of risk.

However, there are circumstances where commercial lenders are happy to offer 100% LTV commercial mortgage financing. This usually involves the borrower putting up extra security and the lender claiming a first on it. Read on to find out more...

How to get a business mortgage with 100% LTV

A 100% business mortgage is basically a secured loan for the total value of the property you’re buying, so no deposit is required.

As for how you’d go about getting one, most lenders will only offer a commercial mortgage with a high loan to value ratio (LTV) - i.e. over 80% - on the condition that the borrower puts up extra security to safeguard the loan.

This would usually be at least one property or a valuable asset(s) that you or your business owns and holds sufficient equity in. If you default on your commercial mortgage payments, there is a possibility that the security could be repossessed to settle the debt.

What is the eligibility criteria for a 100% LTV commercial property mortgage?

Besides the need for extra security, the eligibility requirements for a 100% LTV commercial property mortgage are the same as any other business mortgage. Although commercial mortgages are always assessed on a bespoke, case-by-case basis, lenders usually reserve their most favourable rates for borrowers who meet the following criteria…

  • Profitability: Commercial lenders often calculate whether a mortgage is affordable based on an assessment of the business’s earnings before interest, tax, depreciation and amortisation (EBITDA). There’s no set rule on how much they will lend based on these figures, but the more confident they are in the firm’s profitability, the better.

  • Credit rating: Some commercial lenders prefer to deal with businesses and individuals with clean credit, as this usually means the deal will be lower risk. However, there are specialist providers who take a flexible view on bad credit and they might take the age and severity of the adverse into account. There are also ways to offset the risk bad credit causes, such as putting up extra security.

  • Trading history: A strong track record in the industry you’re investing in will usually boost your chances of securing a commercial mortgage. There are lenders who insist on prior experience, especially for higher risk fields like retail. However, it may be possible to find a specialist provider that caters for first-time investors and start-ups.

  • The viability of the investment: Commercial lenders will only offer a mortgage if they feel the investment is viable, and they will assess this based on many of the factors we’ve already discussed, such as the applicant’s trading history and profitability. Some providers will expect you to present a strong business plan to evidence viability, and if it’s a commercial investment mortgage, most providers will base their lending decision on the projected rental coverage.

How do I apply for a business mortgage with 100% LTV?

The best way to apply for a commercial mortgage with a loan to value (LTV) ratio of 100% is through one of the whole-of-market brokers we work with. That way, you can rest assured you will end up with the best rates you qualify for.

They can offer bespoke advice on commercial mortgages and search the entire market for the lender best positioned to offer favourable rates on a 100% LTV deal to a borrower with your needs and circumstances.

You can make an enquiry to speak with one of them today and kickstart your application.

Can I get a 90% LTV commercial mortgage?

This might be possible, but you would need at least a 10% deposit and additional security to convince the lender to go above their usual commercial mortgage LTV ratios.

Some lenders may consider this higher risk even with security in place, so it’s vital to seek advice from one of the  whole-of-market brokers we work with to ensure you’re matched with the right provider.

Can I get a business mortgage with 80% LTV?

If the mortgage is an owner-occupied deal, it may be possible to get an 80% loan to value (LTV) ratio with a 20% deposit and no extra security, as some commercial providers will lend under these terms, assuming you meet all (or at least most) of their other requirements.

It would be more difficult to get a commercial investment mortgage with 80% LTV as most lenders draw the line at 75% for these deals, but with additional security and a specialist provider, it is theoretically possible.

A commercial mortgage with 85% LTV or higher, whether owner-occupied or investment, would usually require additional security of some form.

Can I get a business mortgage with no deposit?

As we’ve discussed throughout this article, it is possible to get a commercial mortgage with no deposit if you have additional security to put up, such as a property or business asset you own and hold sufficient equity in. See the section on 100% LTV commercial mortgages at the top of the article for more information.

Commercial mortgage LTV rates are usually capped at 70-80% for owner-occupied and 75% for commercial investment, but it may be possible to get 80% plus by putting down some deposit as well as additional security.

Speak to an expert on commercial mortgage loan to value ratios

If you have questions and want to speak to an expert for the right advice, call Online Mortgage Advisor today on 0800 304 7880 or make an enquiry here.

Then sit back and let us do all the hard work in finding the broker with the right expertise for your circumstances. We don’t charge a fee and there’s absolutely no obligation or marks on your credit rating.

Updated: 26th June 2019
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FCA disclaimer

*Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The info on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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