Commercial Mortgages

If you are seeking to finance the purchase of land and/or buildings for your business, a commercial mortgage will probably provide the most flexible and affordable financing solution. A commercial mortgage is a specialised commercial loan, and as such, the lender has a legal claim over the property until the loan has been fully repaid.

As with a residential mortgage, the commercial lender can hold the title deeds to the property as security. In the event of arrears the mortgage lender can repossess the commercial property.

A business owner who wants to fund his/her premises may use an 'owner occupied' Commercial Mortgage.

A Landlord can 'buy to let commercial' that is to say the landlord can purchase a commercial property solely for investment purposes and rely on the rental income to cover the mortgage and provide a profit.

Buying Commercial Premises - Advantages & Disadvantages

Buying commercial premises can be a good investment but before you commit, it is important to consider carefully the pros and cons. The acquisition of a property adds stability to your business and the property itself can become a significant asset, so let's look at the upsides and the downsides to buying:

ADVANTAGES:

1. A fixed rate mortgage means you will have predictable monthly repayments
2. The repayments are likely to be similar to a rental payment on the same property
3. You are protected from any sudden rent increases
4. Interest payments on the commercial mortgage are tax-deductible
5. Possibility to sub-let any free space, reducing your monthly repayments (lenders permission may be required)
6. Potential gain in value of the property

DISADVANTAGES:

1. Substantial deposit will be required - would this money be better allocated to more important business purposes?
2. Selling business premises can be difficult. What if you want to re-locate?
3. If you have a variable rate mortgage, you are exposed to increases in interest rates.
4. Ownership means you'll be responsible for ongoing costs such as security, maintenance, fixtures and fittings, insurance, repairs & renewals.
5. Potential reduction in value of the property

The Financial Services Authority does not typically regulate Commercial Mortgages.

Your property may be repossessed if you do not keep up repayments on your mortgage.