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Commercial property types

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By Pete Mugleston   Mortgage Advisor

Last updated: 10th June 2019 *

Can I get a mortgage for my commercial property?

We receive lots of enquiries asking about commercial mortgages and, in particular what types of commercial properties and businesses would be able to secure a mortgage, if required.

The good news is there’s lots of different options for commercial mortgages available across a wide variety of businesses or trades. Once you’ve read through the information below if you make an enquiry with us we can arrange for a commercial mortgage expert to speak with you directly.

In this article we will cover:

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What types of commercial activity am I able to secure a mortgage for?

Whatever type of business you are looking to secure lending for, the good news is it’s highly likely there’s a lender who will consider looking into your requirements.

The list of commercial activities where it’s possible to secure mortgage lending is pretty exhaustive. The type of property which can be considered for a commercial mortgage could include:

  • Hotels or Guest Houses
  • Nursing or Care homes
  • Agricultural property - farm buildings/land
  • Schools or colleges
  • Shopping centres, shops and other retail outlets
  • Entertainment centres - restaurants, nightclubs etc
  • Casinos (difficult to arrange mortgages for as there are very few independent casinos - larger chains tend to fund their own growth)
  • Professional properties - solicitors, medical centres etc
  • Office or apartment buildings
  • Factories and other industrial properties
  • Warehouses
  • Leisure centres (difficult to arrange mortgages on as the gym sectors in competitive - expected higher rates and capped LTV)
  • And many more

Every lender will assess the different type of commercial activity in their own way, based on the level of expertise available within their own ranks. What activity one lender may consider high risk another may deal with on a regular basis and would, therefore, be more willing to consider a commercial mortgage application.

The advisors  we work with are able to look at solutions from across the whole market. If you make an enquiry with us we can arrange for a commercial specialist to contact you directly and discuss your specific requirements.

Can I get a commercial mortgage for my bed and breakfast business?

Yes, as long as you’re eligible for one. It will certainly help your cause if you have experience and a strong track record in this specific sector.

A bed and breakfast property is a fairly common business in the UK, therefore, would likely be a type of commercial activity most business lenders have experience of dealing with.

Regardless of the type of business or property you’re looking to purchase, there’s a few areas a lender will want to review and which you should be prepared for.

  1. First of all, a lender will request an Asset and Liability form in order to assess a business’ net worth. If the amount of liabilities far outweigh a business’ assets it’s possible a lender will not consider the application any further.
  2. If a business’ net worth looks relatively positive the next stage would be to review its income and expenditure in order to assess whether the proposed mortgage is affordable. For example, a bed and breakfast business would need to clearly evidence a healthy margin between the room rates and bookings taken versus the costs accrued to service the number of guests throughout the year.
  3.  Typically, most lenders will require evidence of financial accounts for the previous three years in order to accurately assess whether a business can afford the future repayments for a commercial mortgage.
  4. Finally, a commercial lender will conduct a valuation of the business property before reaching a final decision.

If you run a bed and breakfast business or looking to purchase this type of commercial property, make an enquiry with us and we can arrange for an expert in this area to get in touch.

Can I get a commercial mortgage to finance a hotel purchase?

Yes, it could be possible. As outlined above, you should expect a lender to conduct a thorough analysis of your business accounts in order to assess whether the commercial viability exists to adequately cover the mortgage repayments. Moreover, it will help your cause if you have experience in this industry sector.

All lenders will review a business and its commercial activity on an individual basis.

For example, a lender may approve a restaurant mortgage as a result of that particular restaurants ability to create healthy profits.. A hotel business, on the other hand, succeeds based on the standard of its accommodation and guest services.

The lender will take a number of variables into account when assessing the viability of a hotel investment, such as the property’s location and operating performance.

These are key factors, along with value for money, that will influence the viability of a business and, ultimately, how strong a case they can make for any future borrowing requirements.

You can find out more in our guide to hotel mortgages.

Can a charity or church secure a commercial mortgage?

Due to the unique nature of how such organisations are funded, finding lenders who will consider mortgages for either churches or charities can prove to be more difficult than for traditional commercial activity.

However, there are a few lenders who will consider lending to these types of organisations. The basics still apply of ensuring a solid track record of business accounts exist and a clear path to affordability can be evidenced.

Mortgage providers who do cater for charities usually cap the loan to value (LTV) ratio at 65% and decide which rates to offer on a case-by-case basis.

There are also a number of bespoke lenders who can provide commercial mortgage rates for churches and would typically offer LTVs up to a maximum of 70%

If you are a church or charity organisation and want to consider your mortgage options, make an enquiry and we can arrange for an expert in this area to get in touch.

Can you buy a pub business using a commercial mortgage?

Yes, this is also possible. A pub business is one of the most traditional within the UK and, despite a downturn in recent years, most lenders should have a good understanding of lending in this sector.

As mentioned in previous sections with hotels and restaurants, each business will be evaluated on a case by case basis on the strength of the previous trading record, future profit projections, marketing plan, the client’s experience and the location.

If you’re considering buying a pub business and want to consider a mortgage to assist with the purchase, make an enquiry and we can arrange for an expert to contact you.

Our guide to pub mortgages can be found here.

Can you buy a Livery yard business using a commercial mortgage?

As with all businesses this is certainly possible. There are a few specialist lenders who cater for equestrian businesses and can provide commercial mortgages with bespoke rates and loan to values, typically, up to 65%.

Buying office or apartment blocks and retail outlets using a commercial mortgage

Lenders can also cater for businesses who may look to purchase property where the aim may be to lease or rent out those commercial units.

Most lenders can offer bespoke commercial mortgage rates for prospective business owners where their main commercial activity is to offer the properties for rent to other businesses, such as:

  • Office buildings
  • Block of flats
  • Retail properties
  • Apartments

In order for a business to secure the best commercial mortgage rates a lender will focus on the viability of the business activity, the industry experience (and qualifications) of the business owner and/or their appointed management team and their previous credit history.

If you’re a business owner and want to consider a commercial mortgage, in order to find the best rates its important you speak to us in the first instance. We can put you in direct contact with a broker we work with who can offer the best whole-of-market advice tailored to your own needs.

What deposit do I need for a commercial mortgage?

Generally, most lenders require a deposit of between 25-40% for commercial mortgages depending upon the level of risk they deem to be taking and the type of commercial mortgage requested.

For an owner-occupied mortgage (used for properties specifically for a business trading premises), most lenders will require a deposit of between 20%-30%. For a commercial investment mortgage (for properties bought for rental purposes as part of a portfolio), most lenders will require deposits of 25% although some may accept lower.

However, depending upon the level of security a business may be able to provide, there are some lenders who may be able to provide lending up to 100% of the commercial property’s value (as long as additional security is offered).

Read more in our guide to commercial mortgage deposits.

What commercial mortgage can I afford to get?

The answer to this question is very much dependant upon a number of factors, as outlined above. Commercial lenders will want to establish that a mortgage is serviceable, which means the projected income from a business is adequate and high enough to cover the cost of the loan (most lenders require a net cash margin over the loan cost).

Specialist business lenders work out how much a business can borrow on a commercial mortgage by assessing its operating performance, and they do this by looking at earnings before interest, tax, depreciation and amortisation (EBITDA).

There are few hard and fast rules on the amount a commercial mortgage provider will lend based on a business’s EBITDA (most lenders require a net cash margin over loan cost), but they will need to be confident that it shows the firm is profitable enough to afford the mortgage payments each month.

If you’d like to know more about how much your business may be able to borrow for a commercial mortgage make an enquiry and we can ask an expert we work with to contact you directly.

Can I get a commercial mortgage with credit issues?

A poor credit history can, no doubt, cause problems with how much a lender may be prepared to lend you, depending on the type of issue you’ve had and when it was registered.

Some lenders might offer unfavourable rates or turn the borrower away if there’s bad credit on file, but there are specialist commercial lenders who cater for individuals and businesses with various forms of bad credit.

For more information on this see our bad credit commercial mortgages article here.

Alternatively, make an enquiry and we can arrange for an expert to contact you directly and discuss further.

Why you should speak to a commercial mortgage broker

At Online Mortgage Advisor we can offer you a first-class service tailored to your own specific needs with access to the most experienced brokers available that:

  • Have whole of market access
  • Can offer bespoke advice on a number of commercial property types
  • Have excellent relationships with commercial lenders
  • Are OMA accredited advisors
  • Have completed a 12 module LIBF accredited training course

Speak to a commercial mortgage expert

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: 10th June 2019
OnlineMortgageAdvisor 2019 ©

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.

Find out more about commercial mortgages

Commercial Mortgage Guide