Commercial mortgages - a background briefing
Fri, 26 Oct 2007
With approximately 150 commercial property lenders operating in the UK today there is a wide choice of mortgage lenders offering a variety of services.
A wide variety of banks, building societies, package lenders and insurance companies provide mortgages against commercial property (whether owner occupied or investment properties that are rented out). These should be readily available so long as there are no major problems with the property (such as environmental issues) and the borrower has no adverse credit history, can provide three years worth of accounts showing sufficient profits with which to service the proposed mortgage payments, and has had no catastrophic trading losses in any one year.
Advances from mainstream banks are usually in the range 60% to 70% of open market value (OMV) while levels of advance from non mainstream lenders have increased to 85% to 80% although these may fall as a result of the ‘credit crunch’.
If you are not able to provide full accounts meeting the tests referred to above, then you can still borrow by ‘self certifying’ income, which essentially means that you confirm to the lender that you believe you will be able to make the payments, but the lender will charge a higher interest rate for the risk they are taking that you cannot.
Similarly there are lenders who will lend to you (again at a higher interest rate) if you have a poor credit history (known as adverse) involving County Court Judgements, Company Voluntary Arrangements or missed mortgage payments.
Many lenders charge an initial administration or completion fee for arranging the mortgage which can be 1% or 2% of the advance.
Many of the lenders who provide self certified or loans to clients with adverse also have high redemption penalties for the first 5 or 6 years as they expect those borrowers whose ability to borrow improves to seek to remortgage once they are able to do so. Some of these redemption penalties can be reduced by paying an additional upfront fee at the time of taking out the mortgage.
To see which lender meets your requirements use the loan finder service on this site.
