Business mortgage (also known as owner-occupier mortgage)
If you are looking for a mortgage to purchase premises for your business you will need a business mortgage or owner-occupier mortgage. If you already own your business premises and are looking to refinance the property you will need a business remortgage (or owner-occupier remortgage).
Commercial investment mortgage
If you are looking to invest in non-residential property to rent out to other businesses you will need a commercial investment mortgage. If you already own a commercial property for investment purposes and are looking to refinance it, you will need a commercial investment remortgage.
Generally, commercial mortgages are for 15 years or more, and, as with a residential mortgage, the premises will be at risk if you are unable to keep up your repayments. The majority of mainstream lenders offer commercial mortgages, but it’s important that you can meet their lending criteria.
Although some lenders may still accept applicants or businesses with an adverse credit history, it helps if you can show a clean credit record, as this will give you greater choice and a more competitive deal. Lenders will apply a loan to value ratio to the mortgage and will often require you to invest some of your own money into the property. The more of your own money you invest, the more chance you will have of securing the mortgage.
The lender will also want information about your business and will be looking to see if it is profitable. They may request your business accounts and projections to check that the business has longevity and is not under any immediate financial pressures.
Some lenders may impose restrictions on the property, such as the ability to sub-let to other businesses, so you should seek professional advice from your solicitor, and if required, a chartered surveyor.
The majority of deals are either fixed rate or variable rate. Fixed rate deals are usually between two and five years and can provide you with repayment stability if this is required, although you won’t be able to take advantage of any falls in the base rate. On the other hand, taking a variable rate mortgage will allow you to benefit from any reductions in the base rate, but will also mean repayments may increase if the base rate increases.
The specific repayment options available are similar to those found in the residential mortgage market. A repayment mortgage option (where you pay the capital and interest back each month) means you will have all your bases covered in repaying what you have borrowed.