100% Commercial Mortgages

In this article, we’ll explain if it’s possible to get a 100% commercial mortgage and outline all of the options available if you don’t have a deposit to put down for your property purchase.

What is a 100% commercial mortgage?

This is a type of commercial mortgage requiring no cash deposit. Instead, you’ll be borrowing the entire value of the property from a lender. So, if the purchase price of the property is £300,000 your commercial mortgage will also be £300,000.

Are these products available?

Yes, it’s possible to get a commercial mortgage without putting any money down. Instead, you’ll need to rely on another property or asset which you can put forward as security.

If this option isn’t open to you, the maximum LTV most lenders in this space will stretch to is 75-80%.

Remember that if you do use another asset to secure your new mortgage, you risk losing it should you ever default on the loan.

How to get a commercial mortgage with no deposit

Follow the steps below before you start your mortgage application, to give yourself the best chance of success.

1. Find a broker who specialises in 100% commercial mortgages

A no-deposit commercial mortgage is by no means standard and without a deep knowledge of the market and the many specialist lenders who operate away from the high street you will have trouble finding one who is a good match for you.

The only way to be sure you’re getting the product and the rate that’s right for you is to use a broker who specialises in 100% commercial mortgages. They will understand the marketplace and have the contacts and knowledge you need to secure the best mortgage for you.

Make an online enquiry now and we can match you, free of charge, with a commercial mortgage broker.

2. Decide which assets you will use to secure your loan

If you don’t have the cash for an acceptable commercial mortgage deposit, your broker will start by asking if you have any form of security that can act in its place. Normally this would be another property in your portfolio – either another commercial property or potentially your own home. You will need to have enough equity to cover the equivalent of a deposit, either as a first charge if you own the property outright or a second charge if you have an existing mortgage.

If this is not possible, some commercial lenders will consider business equipment, but many will impose conditions such as a maximum age on the asset or allowing only a percentage of its value to give scope for depreciation.

3. Consider your other costs

If you’re applying for a no-deposit mortgage because cash flow is tight then don’t forget that there will be other costs involved. Depending on the size of the mortgage there will be arrangement fees to factor in – normally between 1-3% of the cost of the loan – as well as legal costs, surveyor and broker fees and valuation costs. There may also be post-completion costs, such as the fees involved in moving your business. A broker will make you aware of these costs before you commit to any mortgage.

Will the interest rates be higher?

Yes, rates for these types of mortgages will typically be higher.

Rates are all about risk for lenders, so anything that increases the risk they take on when lending to you will push up the cost. You may find for example that you’re offered slightly higher rates if the asset is secured as a second charge on a property with an existing mortgage outstanding, as this involves a little more risk for the lender.

How can you get lower rates?

If you can show lenders you’re a safer investment you might be able to attract a better rate. This means backing up your application with as much evidence and planning as possible. This could include thorough business and marketing strategies, evidence of your industry experience and profitability projections – anything that will reassure lenders that you are well-placed to keep up mortgage repayments.

What alternatives are available?

This depends on the type of commercial property project you’re looking at and the amount you need to borrow.
If you’re looking to sell the property relatively quickly or have another exit strategy in mind then a 100% bridging loan could be an option as this type of finance is typically available over a shorter term (12-24 months).

Depending on the amount you need to borrow you could also consider an unsecured loan (either on a personal basis or through your business), particularly if the amount required is £25,000 or less.

Alternatively, if providing the required collateral is a potential barrier, simply offering some cash deposit can help.

A 90% LTV mortgage with a 10% cash deposit and a further percentage secured on another asset could open up more lenders and rates and if you can stretch it a bit more then even better. Some lenders may be happy to give you an 80% LTV commercial mortgage with no further security, depending on your circumstances.

How Online Mortgage Advisor can help

Finding a lender who’s prepared to consider a 100% commercial mortgage can be very difficult without the right expert support, so it’s key that you find a broker who not only has access to the whole of the market but who also has particular experience in this field.

Give us a call on 0808 189 2301 or make an online enquiry now and we can assess your needs and match you with a commercial mortgage broker who has the specialist expertise to find you the loan you need for your business.