Whether you are looking to buy a place for your own business, expand into a new building, rent out your current premises to another organisation or maximise pension opportunities, you are likely to have heard of commercial mortgages. But what exactly are they?
Commercial mortgages, also known as business mortgages or commercial property mortgages, are loans secured on properties other than your personal residence. This can include an office, warehouse, pub, hotel, or retail unit. They work similarly to a mortgage you would take out on a house – both involve taking out a loan against the value of a property and require a deposit.
However, with a commercial mortgage, the only security you really need to provide is the property itself. Commercial mortgages can range from repayment periods of 3 years up to 25 years depending on the price of the property.
In terms of interest rates, there are both fixed and variable rates available. Buy to let mortgages are also available in high volume markets, but different premises can vary hugely in the risk they would pose to a lender, so they are priced on a case by case basis.
So how can a commercial mortgage benefit your business? Below we have broken down 3 positive ways in which you can reap the positive benefits of a mortgage:
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Periods of capital and interest repayment
A mortgage really is an investment, so you should hope to reap the benefits on top of being able to own your own property. One of the greatest benefits of a business mortgage is that substantial capital gains can be made. As property prices continue to rise, capital growth can take place over a long period of time.
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Saving money compared to renting
Rather than renting a property and paying a set amount per month, which is essentially ‘dead money’, with a mortgage you can have peace of mind knowing that one day the property will be yours. A mortgage payment doesn’t usually cost that much more per month than renting a property either. With each payment, your equity will continue to grow.
Another way you can benefit from a mortgage vs renting is that you don’t have to worry about potential rent increases. You can also sublet the property to generate more cash flow, which you cannot do while renting.
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You can make changes to your property
As the property owner, you have a say over any alterations, including potential extensions as the business grows and you need more room. This avoids costly and time-consuming relocations, and seeing the place transform can be very rewarding!
In conclusion
Whether you are set on a commercial mortgage, or are considering your options, keep in mind that there are commercial property mortgage specialists out there who can help you to navigate the market, compare mortgage rates and help you find the right deal. They deal with a variety of lenders such as high street banks and secondary or third tier lenders, meaning you will get the best mortgage for your business needs.
There are numerous types of mortgages being offered by lenders. For instance, there are state-backed mortgages that require zero or low-down-payment as well as commercial mortgages that rely heavily on credit scores and come with a huge down payment requirement, or even reverse mortgages for seniors age 62+ that wish to tap home equity in retirement. (Use this calculator to receive an estimate of available proceeds without personal info). State-backed mortgages are usually meant for individuals with a low income. Choosing the right mortgage is the key to buying a home cost-effectively and conveniently.
