If you are the owner of a commercial property from which you trade or which is your place of business and you have survived the last 4 years, you have done exceptionally well. Owners of such properties, which are let to tenant businesses or residents have, generally not fared as well.
Due to the down-turn in the economy over the last several years, large numbers of former commercial premises have been vacated. There is scope now to purchase these buildings at modest prices either to trade from or to convert into dwellings. Similarly, if you own a Commercial Property, such as a Hotel, Block of Flats, Shopping Centre, Golf Course, etc., we may be able to finance or re-finance at a more affordable rate than previously. Contact LEA FS to see what we can do for you.
What do we mean by a Commercial Mortgage?
There has been some blurring of the definition in recent years. Until about 15-20 years ago, the only way to buy a property to rent out (whether as a residential dwelling or to a trading business) was to take a commercial mortgage from a High Street Bank. All of these loans were repayable over quite short periods, typically, 12-15 years and were repayable on a Capital plus Interest basis. Nowadays, most individual buy-to-lets are bought with the aid of an interest-only loan that is similar to a residential mortgage and provided by Building Societies, Banks or Specialist Lenders.
Commercial Mortgages (and remortgages) are loans that are secured on property used for a commercial purpose. This could be a factory, shop or store, land or other commercial enterprise. Although unusual, it is possible for Commercial Mortgages to be regulated if the borrower or a close family member resides in at least 40% of the property floor area.
Commercial Mortgages are normally available to owners and purchasers of commercial properties either for letting, leasing or for personal use. These mortgages are also suitable for owners of blocks of flats which are to be let or groups of residential investment properties (Buy To Lets). It remains common practice for these loans to be set on a Capital plus Interest basis and it is rare for the term to exceed 20 years.
Other uses for this type of mortgage is to support a development of a site for future sale or for letting. Typically, these are referred to as Development Loans and, on occasion, the interest on these loans may be 'rolled-up' and repaid when the properties are sold on or let. In effect, these become Bridging Loans and the lenders may also seek other security for the loans, taking a charge on other commercial or personal property owned by the borrower.