Commercial Mortgage Calculator: How Much Can You Borrow?

Calculate exactly how much you can afford with your next commercial mortgage, as well as understand the main factors that will impact your eligibility.

How much can you borrow for a commercial mortgage?

You can typically borrow up to 75% of the property value if you satisfy lender affordability and general eligibility requirements. Specialist lenders will assess whether the mortgage is serviceable and affordable based on earnings before interest, tax, depreciation and amortisation (EBITDA), so you will need to show that the business is profitable enough to cover the mortgage and interest payments.

There is no absolute rule on how much you will be able to borrow based on EBITDA figures. The deal you’re offered would usually be bespoke to you and your business.

You will have more chance of being eligible with a lower rate, as this will reduce your monthly repayments and improve your overall financial outlook.

If your business is not profitable enough (based on adjusted net profit) to cover the mortgage payments, some lenders will allow you to declare other legal forms of income and factor them into their affordability assessments.

Is affordability calculated differently for commercial investment mortgages?

The main affordability difference between owner-occupier and commercial buy-to-let mortgages is that the lender might base the amount you can borrow on the forecast rental income. Some providers will expect it to reach 190% coverage for commercial properties and 125 – 145% is standard for buy-to-let investments.

Specialist lenders may drop to 110-125% rental coverage, but usually only when they lend at 65% LTV.

How to get a commercial mortgage quote?

Getting a commercial mortgage quote can be complex, so a good first step is to get in touch and let us match you with a specialist commercial mortgage broker. They’ll be on hand throughout the whole process to answer your questions and guide you through the application.

To get started you should:

Use our mortgage calculator to estimate your repayments

Tell us how much you want to borrow and the length of the term and you can see how much your loan will cost you every month at different interest rates. Play around with it to test out different scenarios to give you an idea of what you’re working with.

Put together a business plan

When assessing affordability, commercial mortgage lenders are looking at how much you’re going to be making and whether that’s enough to cover your payments, so you need clear evidence of projected income.

Identify the right lenders

Choosing a commercial lender isn’t just about the cheapest rates. Once your broker understands your specific needs and circumstances they’ll be able to find exactly the right deals for you.

Additional costs and fees

Your affordability will not just be affected by the monthly mortgage payment, but other fees that are involved in a commercial mortgage:

• Arrangement fees: Usually charged at 1-2% of the loan amount for commercial mortgages of up to £1 million. These can be added to the loan.
• Valuation fees: Valuation reports can be more stringent for commercial mortgages (compared to residential) and the exact amount payable will vary from one lender to the next. Unlike with residential, some lenders won’t demand these fees upfront.
• Broker fees: Usually around 1% of the loan amount but be wary of deals with high upfront broker fees. The commercial mortgage brokers we work with only charge on success and will refund any advance charges if they’re unable to arrange a commercial mortgage for you.
• Legal fees: These will depend on the solicitor you use and sometimes the purchase value, but you should budget for at least £500 – £1500.

How does having bad credit affect affordability?

Having adverse credit on your file might affect the commercial mortgage you’re eligible for as it can mean fewer lenders to choose from, and some providers might be unwilling to offer you their most favourable deals unless your credit rating is spotless.

That said, there are commercial lenders who specialise in bad credit customers, and they might be willing to take the severity and age of the credit issue on board when assessing you for the mortgage you’re looking for.

It’s also worth bearing in mind that there might be ways you can offset the risk your bad credit poses, such as putting up extra security or offering personal guarantees from the company directors.

How Online Mortgage Advisor can help secure your commercial mortgage

Given the complexities of commercial mortgage affordability, it’s vital that you get the help of a specialist commercial mortgage broker. They know every business lender on the market and can give you a bespoke range of quotes.

Give us a call on 0808 189 2301 or make an enquiry online and our free broker-matching service will arrange a free, no-obligation call with the expert who’s best placed to help.