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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: 24th June 2020*

We hear from lots of customers who are looking for large commercial mortgages to purchase high-value properties.

Many of them want to know whether they’d qualify for a business mortgage of a certain size while others are keen to hear what rates they’d get.

To answer these questions and more, we’ve put together this comprehensive guide to large commercial mortgages, and you’ll find the following topics covered below…

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What is classed as a large commercial mortgage?

There is room to debate what would be classed as a ‘large’ commercial mortgage as many lenders in this sector have no strict limit on the amount they’d be willing to offer, as long as the borrower meets all (or at least most) of their affordability and eligibility requirements.

That said, an average commercial mortgage would be around the £400,000 mark, so some lenders will tell you that anything more than £1 million is a ‘large’ business mortgage.

What is the affordability criteria for a large commercial mortgage?

Some lenders might be more stringent with their affordability checks if the commercial mortgage you’re applying for is especially large, but the way they calculate whether the loan is serviceable is much the same as for business mortgages of smaller amounts.

Most commercial lenders work out how much a business or business professional can afford to borrow based on operating performance, specifically by assessing their earnings before interest, tax, depreciation and amortisation (EBITDA).

Large commercial mortgage calculators

There is no hard and fast rule on how much you will be able to borrow based on your profitability, but the lender will need to be confident that the loan is affordable, after running the EBITDA figures through their large commercial mortgage calculator.

If the investment or business the loan is supporting is not profitable enough to cover the large mortgage amount you need, some lenders will allow borrowers to declare other forms of legal income they have and factor this into their affordability calculations.

What are the deposit requirements for large commercial loans?

Commercial mortgages of any size usually call for a deposit of 20-40%. In general, the requirements for commercial investment mortgages slightly higher than for owner-occupier agreements, as these deals are typically offered with a loan to value (LTV) ratio of no more than 75%, while owner-occupier mortgages go up to 80%.

To give an example of how deposit requirements can vary for business mortgages, a 1 million pound commercial mortgage would typically require a deposit of between £200,000 and £400,000, depending on the level of risk the lender is taking on.

Can I get a commercial mortgage with 100% LTV?

Some lenders may allow this, but only under specific circumstances, such as when the borrower puts up additional security to safeguard the loan. This would typically be other properties or assets you own and hold sufficient equity in.

Read more about how loan to value ratios are calculated for commercial mortgages.

How do I get the best large commercial mortgage rates?

Commercial mortgage lenders rarely declare the rates they offer in advance as all businesses mortgages are arranged on a bespoke basis, and rates are determined based on the viability of the investment and the level of risk the lender believes they’re taking on.

Are large commercial mortgages more expensive?

In general, rates can be lower for larger loans (of £1 million and upwards) as it’s often the loan to value (LTV) ratio which drives interest rates up.

Getting the most favourable rates on a large commercial mortgage is a case of finding a whole-of-market broker and meeting the eligibility requirements at as many lenders as possible. That way, all of the best deals you qualify for will be within reach.

The advisors we work with are whole-of-market and can connect you with the lender best positioned to offer you a favourable deal if you make an enquiry.

Large commercial mortgage eligibility requirements

As commercial mortgages are usually arranged on an unregulated basis and tailored to the borrower’s needs, there is no fixed criteria that applies across the board, but business lenders tend to reserve their best rates for customers with the following…

  • Clean credit: Having bad credit isn’t always a deal breaker in commercial lending as there are providers who specialise in customers with various types of adverse. That said, having clean credit usually helps convince lenders that you’re low risk.
  • Industry experience: Although there are lenders for first-time investors, having a strong track record in the industry in question will help convince the provider that the investment is variable. Some lenders insist on experience in high-risk sectors.
  • A healthy deposit/good security: Putting down extra deposit or security can help minimise any perceived risk caused by things like bad credit or inexperience.
  • A strong business plan: Not all lenders will insist on seeing a full business plan, but presenting a strong one that highlights healthy future projects can help your cause, especially if you’re a new investor or are applying through a start-up.

If you don’t fit the above criteria down to a tee, don’t panic. There are specialist commercial lenders out there who may take a flexible stance on your application if you can prove you meet their affordability requirements. Make an enquiry for more information.

Why do I need a large commercial mortgage broker?

Seeking specialist advice before applying for a large commercial mortgage is always recommended. There are fewer lenders for loans of £1 million and upwards, so finding the most favourable deal is much easier with a whole-of-market broker on your side.

The experts we work with can give you bespoke business mortgage advice and introduce you to the lender best positioned to offer you a favourable deal if you make an enquiry.

Can I get a small commercial mortgage?

That depends on your definition of ‘small’. Some lenders have a minimum loan amount of around £26,000 as anything less than £25,000 would usually be considered a business loan.

There may be a range of possible lender options for commercial mortgage amounts of between £26,000 and £100,000, and the way these loans are assessed is no different to large commercial mortgages, although the interest rate could be more favourable.

Speak to large commercial mortgages expert

If 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 enquiry online.

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: 24th June 2020
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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.