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Financing a Property Portfolio with a Commercial Mortgage

Looking for a commercial mortgage to cover a portfolio of properties? Here’s everything you need to know about the process and how these property loans work.

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Pete Mugleston

Author: Pete Mugleston - Mortgage Advisor, MD

Updated: July 11, 2022

If you own multiple commercial properties, or are planning to build a property portfolio, then a mortgage covering the whole group could be what you need.

This guide covers all the important areas worth understanding about commercial portfolio mortgages. You’ll learn how they work, the application process, and where you get expert support and advice.

Keep reading for all the details or click on a link below to head straight to a specific section…

What are commercial property portfolios?

This refers to a group of investment properties. You might own multiple buildings with a commercial aspect as an individual, a company, or with other investors. Owning a variety of commercial real estate can help to diversify your property investment portfolio and spread some of your risk.

A commercial portfolio could contain a mixture of:

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Can you finance a property portfolio with a commercial mortgage?

Yes, this can be possible to arrange. If you’re planning on purchasing multiple properties with some sort of business aspect to them, a single way of financing the property portfolio is extremely useful.

However, mortgages of this nature can be complex to set up and are created on a bespoke basis. This means no fixed blueprint that applies to everyone. Each lender will have their own way of deciding how much finance they’re willing to approve. But, exploring 100% financing options is not unheard of and can be done in some instances.

Are the rules different to buy-to-let portfolios?

The way a commercial loan works will be different to standard buy-to-let (BTL) portfolio mortgages. Whereas a BTL portfolio mortgage is designed for landlords with multiple properties, a commercial version is more applicable if there is a business element to the investment properties in the portfolio.

How a commercial portfolio mortgage works

Going down the commercial portfolio path can also impact the structure of your loan terms. It would essentially mean entering a single mortgage agreement and paying one monthly instalment for all of your properties, rather than having a separate mortgage for each.

This usually involves slightly different eligibility and deposit criteria for you to meet. However, because a portfolio mortgage for commercial properties would be created on a tailored basis, the right lenders can work with you to find the best solution.

Eligibility criteria and deposits

Here’s a quick breakdown of the important areas that will impact the process and your ability to qualify for a commercial mortgage to cover a whole portfolio of properties:

Deposit and loan-to-value (LTV)

Most lenders will require a mortgage deposit in the range of 25-30% of the commercial portfolio’s value. However, it can be possible to make arrangements with a higher LTV ratio if you have other assets to use as security. Or, if you have an existing portfolio, you could look into refinancing and using equity to cover your deposit.

Portfolio size

Certain lenders will only work with you if your commercial portfolio is above a minimum figure, £500,000 in most cases. And for some, they will only be comfortable with portfolios below a specific level. This upper limit can potentially be as high as £100,000,000. So, it’s important you deal with the right lender for the size of your portfolio.

Finance projections and business plan

Because this will be a potentially large investment, lenders will want to see proof of sound financial projections. A common tool used is a rent to interest (RTI) cover calculation. You’ll have to show them you can generate enough rental income to cover repayments and any interest on the loan. Creating a watertight business plan will also be crucial.

Your professional experience

Having a strong track record as a commercial landlord will be an excellent asset in support of your portfolio mortgage application. If you don’t have significant experience, there are some lenders who will still be willing to discuss loans. But, you’ll likely need expert advice to find these options.

The number of properties

In order for a portfolio mortgage to be appropriate, some lenders will require you to own a certain number of commercial properties. This often means owning at least four buildings.

Interest-only or repayment

Some lenders will let you select either an interest-only arrangement or a repayment structure for your commercial portfolio mortgage. Each will have an impact on your monthly payments and cash flow projections. A higher interest rate will also usually apply with interest-only loans.

Credit scores

Whether you’re applying as an individual or as a business, your credit scores can influence lenders and the rates you’re offered. It’s worth downloading all your credit reports before applying and getting your broker to go through the results with you.

Don’t panic if you have any existing credit issues. A specialist commercial mortgage broker will still be able to introduce you to lenders that are happy working with bad credit applicants.

How to apply for a commercial portfolio mortgage

The exact application process will depend on your situation and commercial portfolio plans. But, there are some universal steps that you can follow to make sure you end up with the right finance solution and the best rates possible:

Step One: Gather your documents and information

Before you begin the application, it’s worth having all the relevant information to hand, including the potential rent you expect to receive, type of building you’re looking to buy etc. If you have an existing commercial portfolio, put together all these details in one place. Similarly, if you have separate mortgages or any individual purchase plans, all of this will be helpful.

You’ll also need standard documents such as photo ID, proof of address, and income information related to you or your business. Having everything in one place will save you a lot of time and energy once the ball gets rolling. And, it can help your advisor make sure you end up with the ideal mortgage for your property portfolio.

Step Two: Get expert advice from a commercial broker

Once you have all your details prepared, speaking to an expert advisor is the next step on your journey to finding the right commercial mortgage. By speaking to a commercial mortgage specialist, you can get proper advice on your current plans and advice on the next steps.

An expert advisor will be able to help you structure your application in the most attractive way possible. Then, they’ll be able to use their existing industry contacts to introduce you to niche lenders, private banks, and even high street lenders who can facilitate large commercial mortgages for multiple properties.

Step Three: Find the best lending solution

With your application ready to go, your broker will help you approach commercial lenders with your plans and find the right way to move forward. The benefit is, this means access to mortgage deals and rates not advertised or available to the rest of the public.

Your chosen lender will then work with you to create a tailored borrowing arrangement to suit your needs. Approaching the right lenders through your broker means a better chance of more control over the lending terms. This results in the best rates and a loan agreement that fits your commercial property portfolio goals.

If you’d like some expert advice to assist you with your commercial portfolio mortgage application, just make an enquiry. We’ll set up a free, no obligation chat between you and a specialist advisor.

Why you would choose a portfolio mortgage for your property investments

If you own multiple buildings, having multiple mortgages can make your situation fairly complex. Opting for a portfolio mortgage that covers all your commercial properties can come with some excellent benefits:

  • Easier to manage by dealing with a single lender.
  • More predictability with your cash flow and business plans.
  • Only one point of contact for all your property loans.
  • Opportunity to get a bespoke lending agreement that fits your needs.
  • It can be a more tax-efficient way to own bulk properties.
  • Recycle income and equity to further grow your commercial portfolio.
  • Because a portfolio is treated as one entity, your best-performing properties can make up for any poor performers.

There are of course some potential risks and disadvantages to consider:

  • This kind of investment can be a high-risk, high-reward endeavour.
  • Thorough financial projections and a sound business plan will be required.
  • Any form of major property investment comes with a level of risk.
  • Usually requires expert advice and support to arrange.

Lenders who offer commercial portfolio mortgages

Not every lender will be able to create a bespoke lending arrangement for your property portfolio. Here are a few examples of big-name lenders who would be willing to discuss your options:

  • Yorkshire Building Society
  • Aldermore
  • Hodge Bank

The exact rates on offer will vary based on your personal circumstances and the way you decide to structure your loan. It’s important to remember that each mortgage offer will be developed on a case-by-case basis.

If you want to see the full range of available options, the best strategy will be to discuss your commercial portfolio plans with a specialist mortgage broker.

Get matched with a specialist commercial portfolio mortgage broker

Going through the process of consolidating your mortgages to hold everything with one lender can involve some extra upfront legwork. But, the effort will pay dividends and make your commercial portfolio much simpler to manage moving forward.

We offer a free broker-matching service. This means we’ll quickly assess your property portfolio needs and then pair you up with an expert commercial mortgage advisor.

Just call 0808 189 2301 or make an enquiry. We’ll set up a free, no obligation chat between you and a specialist broker today.

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We know everyone's circumstances are different, that's why we work with mortgage brokers who are experts in all different mortgage subjects.

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About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!

Read more about Pete

Pete Mugleston

Mortgage Advisor, MD

FCA disclaimer

*Based on our research, the content contained in this article is accurate as of the 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 information 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.

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