We hear from lots of customers who are in the market for a\u00a0<a href="https:\/\/www.onlinemortgageadvisor.co.uk\/commercial-mortgages\/" target="_blank" rel="noopener noreferrer">commercial mortgage<\/a>\u00a0and want to know how much they will be able to borrow. The answer to this question isn\u2019t always simple, which is why we\u2019ve put together this guide to commercial mortgage affordability.\r\n\r\nYou\u2019ll find the following topics covered in-depth below\u2026\r\n<ul>\r\n \t<li><a href="https:\/\/www.onlinemortgageadvisor.co.uk\/commercial-mortgages\/commercial-mortgage-affordability\/#borrow">How much can I borrow on a commercial mortgage?<\/a><\/li>\r\n \t<li><a href="https:\/\/www.onlinemortgageadvisor.co.uk\/commercial-mortgages\/commercial-mortgage-affordability\/#deposit">How much deposit do I need for a commercial mortgage?<\/a><\/li>\r\n \t<li><a href="https:\/\/www.onlinemortgageadvisor.co.uk\/commercial-mortgages\/commercial-mortgage-affordability\/#cost-fees">What costs and fees does a commercial mortgage come with?<\/a><\/li>\r\n \t<li><a href="https:\/\/www.onlinemortgageadvisor.co.uk\/commercial-mortgages\/commercial-mortgage-affordability\/#bad-credit">How does having bad credit affect commercial mortgage affordability?<\/a><\/li>\r\n \t<li><a href="https:\/\/www.onlinemortgageadvisor.co.uk\/commercial-mortgages\/commercial-mortgage-affordability\/#length">How the term length impacts affordability<\/a><\/li>\r\n \t<li><a href="https:\/\/www.onlinemortgageadvisor.co.uk\/commercial-mortgages\/commercial-mortgage-affordability\/#impacts">What else impacts commercial mortgage affordability?<\/a><\/li>\r\n \t<li><a href="https:\/\/www.onlinemortgageadvisor.co.uk\/commercial-mortgages\/commercial-mortgage-affordability\/#speak">Speak to a commercial mortgage affordability expert<\/a><\/li>\r\n<\/ul>\r\n[feefo-banner]\r\n<h2 id="borrow">How much can I borrow for a commercial mortgage?<\/h2>\r\nCustomers regularly ask us things like\u00a0<i>\u201cwhy can\u2019t I find a\u00a0<\/i><i>commercial mortgage calculator<\/i><i>\u00a0that shows\u00a0<\/i><i>how much I can borrow<\/i><i>?\u201d<\/i>\u00a0and the answer is because there are no hard and fast rules on this.\r\n\r\nCommercial\u00a0lending is usually determined on a case-by-case basis and the amount you and\/or your company is able to borrow can vary across the board.\r\n<h3>How do commercial lenders calculate affordability?<\/h3>\r\nWe often hear the question\u00a0<i>\u201c<\/i><i>how much can I borrow on a business mortgage<\/i><i>?\u201d<\/i>\u00a0and the answer would usually be based on an assessment of you and\/or your firm\u2019s operating performance.\r\n\r\nSpecialist lenders will determine whether the mortgage is <a href="#differently">serviceable and affordable<\/a> based on earnings before interest, tax, depreciation and amortisation (EBITDA) - it will need to show the business is profitable enough to cover the mortgage payments.\r\n\r\nThere is no absolute rule on how much you will be able to borrow based on EBITDA figures. The deal you\u2019re offered would usually be bespoke, tailored to you and\/or your business.\r\n\r\nIf the investment\/business the loan is supporting is not profitable enough (based on adjusted\u00a0<a href="https:\/\/www.onlinemortgageadvisor.co.uk\/self-employed-mortgages\/net-profits\/">net profit<\/a>) to cover the mortgage payments, some lenders will allow you to declare other legal forms of\u00a0<a href="https:\/\/www.onlinemortgageadvisor.co.uk\/income-types\/">income<\/a>\u00a0and factor them into their\u00a0<a href="https:\/\/www.onlinemortgageadvisor.co.uk\/mortgage-affordability\/">affordability<\/a>\u00a0assessments.\r\n<h3 id="differently">Is affordability calculated differently for commercial investment mortgages?<\/h3>\r\nThe main difference between owner-occupier and\u00a0<a href="https:\/\/www.onlinemortgageadvisor.co.uk\/commercial-mortgages\/commercial-buy-to-let\/" target="_blank" rel="noopener noreferrer">commercial investment mortgages<\/a> from an affordability standpoint\u00a0is that the lender might base the amount you can borrow on the forecast rental income.\r\n\r\nSome providers will expect it to reach 190% coverage for commercial properties and 130% is standard for buy to let investments.\r\n\r\nHowever, there are specialist lenders who will accept anywhere between 110-125% rental coverage, though lending is usually capped at 65% of the property\u2019s value.\r\n<h2 id="deposit">How much deposit do I need for a commercial mortgage?<\/h2>\r\nWhen customers ask us\u00a0<i>\u201c<\/i><i>how much business mortgage can I get<\/i><i>?\u201d<\/i>\u00a0we always ask them to consider how much business mortgage they actually\u00a0<i>need<\/i>, and this will come down to the amount of\u00a0<a href="https:\/\/www.onlinemortgageadvisor.co.uk\/commercial-mortgages\/commercial-mortgage-deposit\/">deposit<\/a>\u00a0they have to put down, among other factors.\r\n\r\nSo, how much deposit will you need? Well, most commercial lenders will ask for between\u00a025-40% deposit\u00a0as the highest loan to value ratio you\u2019re likely to find is 75%.\r\n\r\nHowever, it may be possible to get a\u00a0<a href="https:\/\/www.onlinemortgageadvisor.co.uk\/commercial-mortgages\/100-commercial-mortgages\/">higher LTV deal (up to 100%)<\/a>\u00a0if you\u2019re able to put down additional security, such as a property or properties you own and hold enough equity in.\r\n\r\nThe more deposit you have, the better your chances of securing the mortgage you want since you\u2019ll obviously need to borrow less than someone with a smaller deposit.\r\n<h2 id="cost-fees">What additional costs and fees does a commercial mortgage come with?<\/h2>\r\nWhen it comes to any mortgage product, it\u2019s important to get a full picture of affordability by weighing up all of the costs involved. The overall cost of a commercial mortgage comes down to more than just the monthly payments and the deposit amount you\u2019ll need.\r\n\r\nThere are also additional costs and fees you may have to foot, including\u2026\r\n<ul>\r\n \t<li><strong>Arrangement fees:<\/strong>\u00a0Usually charged at 1-2% of the loan amount for commercial mortgages of up to \u00a31 million. Small loans can come with higher arrangement fees.<\/li>\r\n<\/ul>\r\n<ul>\r\n \t<li><strong>Valuation fees:<\/strong>\u00a0Valuation 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\u2019t demand these fees upfront.<\/li>\r\n<\/ul>\r\n<ul>\r\n \t<li><strong>Broker fees:<\/strong> Usually 1% of the loan amount but be wary of deals with high upfront broker fees. The <a href="https:\/\/www.onlinemortgageadvisor.co.uk\/commercial-mortgages\/commercial-mortgage-broker\/">commercial mortgage brokers<\/a> we work with only charge on success and will refund any advance charges if they\u2019re unable to arrange a commercial mortgage for you.<\/li>\r\n<\/ul>\r\n<ul>\r\n \t<li><strong>Legal fees:<\/strong>\u00a0Commercial borrowers usually have to foot their own legals as well as the lender\u2019s. Around \u00a3500 per party is a typical amount for legal costs.<\/li>\r\n<\/ul>\r\n<h2 id="bad-credit">How does having bad credit affect commercial mortgage affordability?<\/h2>\r\nHaving any\u00a0<a href="https:\/\/www.onlinemortgageadvisor.co.uk\/commercial-mortgages\/bad-credit-commercial-mortgage\/">adverse credit on your file<\/a>\u00a0might affect the commercial mortgage you\u2019re 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.\r\n\r\nThat 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\u2019re looking for.\r\n\r\nIt\u2019s 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.\r\n<h2 id="length">How does the term length impact affordability?<\/h2>\r\nCommercial mortgages can vary from between three and 40-year terms, although most tend to fall into the 15-30 years bracket.\r\n\r\nThe length of time you spread your mortgage payments over can have an impact on the overall cost as a shorter term means larger monthly payments but less interest overall, while a longer term means smaller payments but more interest accrued over time.\r\n\r\nWhich term length is right for you will depend on a number of factors, such as how much you and\/or your business can afford to pay out each month.\r\n<h2 id="impacts">What else impacts commercial mortgage affordability?<\/h2>\r\nQualifying for the commercial mortgage you\u2019ve got your sights set on is a case of meeting the lender\u2019s eligibility criteria.\r\n\r\nAfter all, lower interest rates means lower monthly payments.\r\n\r\nWe\u2019ve already covered the main factors that impact this such as profitability, credit history and deposit size, but the below can also have an affect\u2026\r\n<ul>\r\n \t<li><strong>Your industry experience:<\/strong>\u00a0If you\u2019re a new investor or your business is a start-up, a specialist lender might be required as some providers prefer borrowers to have experience in the relevant industry, especially if it\u2019s a high-risk sector such as retail.<\/li>\r\n<\/ul>\r\n<ul>\r\n \t<li><strong>Your location:<\/strong>\u00a0As commercial lending is usually bespoke, there aren\u2019t too many location restrictions, but loans in Northern Ireland are difficult to transact, so be sure to seek specialist advice if you are investing in this territory.<\/li>\r\n<\/ul>\r\n<ul>\r\n \t<li><strong>The property type:<\/strong>\u00a0Certain\u00a0commercial property types, such as\u00a0<a href="https:\/\/www.onlinemortgageadvisor.co.uk\/commercial-mortgages\/mortgages-for-land\/">agricultural<\/a>\u00a0and churches, may require a specialist lender as not all providers offer mortgages for these. Rates and LTV will be calculated on a case-by-case basis.<\/li>\r\n<\/ul>\r\n<h2 id="speak">Speak to a commercial mortgages affordability expert<\/h2>\r\nIf you have questions and want to speak to an expert for the right advice, call Online Mortgage Advisor today on 0808 189 2301 or make an\u00a0<a href="https:\/\/enquiries.onlinemortgageadvisor.co.uk\/match-me-with-a-commercial-mortgage-specialist\/">enquiry online.<\/a>\r\n\r\nThen sit back and let us do all the hard work in finding the broker with the right expertise for your circumstances. We don\u2019t charge a fee and there\u2019s absolutely no obligation or marks on your credit rating.