What is a Commercial Mortgage?

This type of mortgage is a loan which is secured on property that is not residential. Similar to Self-certified mortgage lending criteria it is provided by specialist lenders to borrowers who have certified that they are capable of repaying the borrowing in the future. 

In these circumstances the lender will rely on the personal covenant of the borrower’s ability to repay the loan, and the value of the property providing sufficient security for the borrowing in case of default. They may also apply more restrictive lending criteria.

Types of Borrower

Borrowers tend to be private individuals, unincorporated businesses or limited companies. Lending criteria will typically require borrowers to provide at least 3 years of business accounts, bank statements, personal guarantees, business plan and cash flow projections.

Are there differences between a Commercial mortgage and a Standard mortgage?

Commercial mortgages are not regulated mortgage contracts, which mean that apart from the economic and business risks associated with running an investment from a Commercial property, borrowers have a reduced level of protection compared to a borrower of a standard regulated mortgage on a residential property.

Usually perceived as high risk propositions, lenders of commercial mortgages use restrictive underwriting criteria. Where specialist lenders are prepared to lend in such cases, the interest charged and mortgage fees are usually higher and loan to value’s (LTV’s) and income multiples lower, to reflect the extra risk involved.

What should I do if I need a Commercial mortgage?

If you want to raise a mortgage on a non-residential property, or you already have a commercial mortgage and want to remortgage, the first and most important step is to have a discussion with us to provide you with independent financial advice.

Once we have accessed your financial status and associated circumstances we will advise you on the most suitable mortgage for your particular requirements and make an application on your behalf to take out a loan based on how much you can afford the value of the property and length of time agreed between you and the lender.

Want to know more?

Talk to one of our qualified financial advisers on 01553 777600 or e-mail us at enquiries@ringassociates.co.uk