How Do Commercial Mortgages Work?

If you take out a loan to purchase any land or property for business use, then it can be classed as a commercial mortgage*. But how does the process work, and does it differ significantly from getting a residential mortgage or business loan?

Importantly, commercial mortgages are always attached to property or land, making them different from business loans. The property acts as collateral. A commercial mortgage is also often referred to as a ‘business mortgage’.

A commercial mortgage application works similarly to taking out a regular mortgage.

One difference is that there are usually no fixed rates for commercial mortgages. Most come with a variable rate. You will also typically pay a higher interest rate than a residential mortgage. Why? This is because lenders consider commercial mortgages a higher risk.

However, commercial mortgages still tend to offer better interest rates than business loans. Typically, they last from three – 25 years and deposits can start at 25% – 30% of the value of the property.

Commercial mortgages generally take over where business loans finish. Business loans up to £25,000 can be unsecured, but for larger amounts lenders need security in order to reduce the risk to themselves – this can include having a guarantor or assigning assets, such as your property, as collateral.

There is one main type of commercial mortgage:

Owner-occupier: Used to buy property as a trading premises.

You should find a specialist mortgage broker to help you secure the right type of loan for your circumstances. They will also be able to assist with your application.

Are there any benefits to commercial mortgages?

There are a few benefits to acquiring a commercial mortgage, including interest being tax-deductible and being able to rent out the property to make more money.

Find a commercial mortgage broker

Speak to Agentis today – your professional commercial mortgage broker. We’ll assist with your next step on the property ladder and help you get your business ventures on the move. Contact us to arrange your free initial consultation.

*Commercial Mortgages are arranged by Introduction Only. Commercial Mortgages are not usually regulated by the Financial Conduct Authority.