Why use a commercial mortgage broker?
A commercial mortgage broker can be extremely helpful when it comes to navigating the complex world of commercial mortgages. So what exactly are the pros of getting a commercial mortgage?
Buying a site using a commercial mortgage for your business to operate from can save massively on the usual expense of rent. There are many arguments when it comes to renting versus purchasing a property for your business. Look at some of the points in this article which go over the pros of your owning your own workplace. Plain and simple, you will be saving money on rent each week and paying towards an investment in property. Along with the tax benefits that can apply to it as well, it’s definitely something you should consider. This is where a commercial mortgage broker like ourselves comes in handy.
Along with using it yourself, you also then have the ability to rent sections of the premises. You could also design the property how you want to. In similar ways to your usual residential mortgage, you buy yourself freedom. With that freedom you can choose to do what you want with your site.
Along with it also gaining equity over time if the property market continues to trend up strongly. As with a residential building, there is nothing like owning your own place. It can help your business grow and give you the ability to make a long lasting stamp with a permanent site of your own that is being bought more and more outright with each mortgage payment you successfully make. If these sound like good points to you I would recommend getting in touch with us to discuss the process below in further detail.
A commercial mortgage for your business
Commercial mortgages work the same way a residential mortgage does in terms of the basic idea. Some main differences are as follows. Commercial mortgages are unregulated by the Financial Conduct Authority. Whereas your typical residential mortgage is heavily regulated. Generally speaking the length of terms on commercial can be potentially longer than residential mortgages.
The way affordability is judged is also different. A residential mortgage is solely down to individual earnings. Commercial mortgages are on the businesses ability to earn, which is judged differently by each commercial lender. The panel for lending is also smaller. With less lenders willing to lend commercially, you are a bit more restricted to who you can borrow from. But lenders can generally be a lot more flexible commercially. Having a commercial mortgage broker helps you to understand this process.
One thing which a lot of people don’t consider is also the residential side of the commercial process. Lenders do want to see history of you living in the country whether it be with a rental or your own property. Having a residential mortgage helps a lot as it shows that you have a history of experience in the mortgage sector.
Assessing the potential for a commercial mortgage
When it comes to looking at the potential of a mortgage for your business, all banks look at it differently. Having a commercial mortgage broker to navigate this can be key. Lenders generally will go over the business accounts and look at different sections depending on lender. The bank will look at the history of the accounts of the business and judge their EBITDA. EBITDA is Earnings Before Interest, Tax, Depreciation and Amortisation. That is generally seen as a companies operating level in a black and white fashion.
Other lenders will not look solely at this but other factors such as turnover and profit. This along with other judgements are made to find out the companies general borrowing power. Each individual lender will analyse and check differently and will therefore come out with different borrowing power which will be unique to each lender. Having a commercial mortgage broker for this can be priceless.
What we will do is take your company accounts and try to align that with your goal. We will look at your what your budget is you want to pay monthly. What sort of commercial mortgage rate you want. What sort of mortgage term you want and the amount you want to lend total. Once we have discussed all of this, we can look through your accounts and do our research with lenders. With us being commercial mortgage brokers, we have special license to advise on this.
Illustration and commercial mortgage application
Once we have completed our research we will present our findings to you. This will consist of a mortgage illustration going over the ins and outs of the mortgage that you could potentially get. And also our client agreement which will run through the breakdown of our fees and service. There is also something to be said for the fees lenders charge commercially.
In general residential mortgages you are looking at flat fees of say £999 or £1995 to set up the mortgage. Sometimes they can also be free. In commercial mortgages this works differently. They tend to charge a percentage of the loan total. So say if your mortgage was £800k and the lenders set up fee was 1% that would be £8k.
If this mortgage deal is acceptable for you, you sign up with us and proceed to the application. Before the application is to take place we will need to gather documents from you and your company. Typically this is ID, company accounts and other documents the lender will need to assess.
Once a full application has been submitted with the lender along with the supporting documents they will arrange a valuation. Generally these also cost money as well whereas on a residential mortgage they can be cheap or free. If all is acceptable the lender will produce a formal mortgage offer. By this point you can see the benefits of having a commercial mortgage broker on your side to carry out this process.
After the offer
The solicitors will proceed the legal process through to completion and at the end you have a commercial premises to call your own. The lender will also need to see the relevant insurances on the building which we can advise you on separately. Commercial insurance can vary in cost to what the purpose of the site is but you will need to have the building protected at a minimum. We provide insurance from a panel of trusted insurers who have market leading costs. We do this process free of charge and can get you the cover you need on your site to comply.
Other mortgage types
When assessing your potential for a mortgage there are other avenues to go down. You could benefit more from a buy to let mortgage if you are just looking to become a landlord and don’t want to run a business from the premises. As mentioned previously, a residential mortgage will help greatly with the commercial process as lenders see that as security. A remortgage could also be something you want to do on your residential home to raise money for commercial ventures, this is something we can look at for you.
It all depends on circumstance which is why it’s best to get in touch with us directly. From first time buyers, self build enthusiasts all the way through to equity release at the end of the line. We advise on it all and are here to help.
Get in touch with us today
If a commercial mortgage is something you think your company could be potentially looking at, contact us today. Being a commercial mortgage broker we advise on the whole of market of lenders and provide impartial advice.