Commercial Mortgages – Things To Consider
Usually, when a business is seeking to borrow money by way of a commercial mortgage, the amount involved is likely to be a sizeable sum – in fact, it can often run into millions of pounds. Therefore, it is important that everything is done to try to make sure that you end up with the most suitable one for you.
In this respect, there are some things that you need to consider to make sure that the commercial mortgage is suitable. Let’s have a look at some of the things you need to bear in mind.
You will want to be comfortable that the lender you are arranging the commercial finance with has a good reputation and is well known in this sector of lending. There are many such lenders including the high street banks and building societies and some specialist commercial mortgage lenders.
You can do your own research if you so wish through the Internet and/or follow the recommendation of a reputable broker.
Unlike a personal loan, where the interest rate tends to be fixed by the lender usually based upon the amount you borrow, the interest rate on a commercial mortgage varies based upon the level of risk you are to the lender. They will look at so many factors when assessing the risk you present such as the strength of your business’s balance sheet/profit and loss account and the loan to valuation (LTV) of the security being offered.
Obviously, you will want to obtain the loan at as low an interest rate as possible because just a ½ % difference in the rate on a commercial mortgage of say £1 million equates to £5,000 per annum.
Potentially, there is a range of fees that you may be required to pay.
These could include an application fee payable to the lender for assessing the loan application that is non-refundable, an arrangement fee payable to the lender for setting up the loan usually based upon a % of the loan, a valuation fee for valuing the property being offered as security/lent on, legal fees to cover both yours and the lenders solicitors costs in dealing with the security and a brokers fee if you use a commercial mortgage broker to source a suitable lender.
You may be able to negotiate over the amount of some of these fees – if you don’t ask you don’t get!
The term of the borrowing will affect the amount you pay back each month and the total amount you will end up paying back. For instance, the longer the term, the lower the repayments but the greater the total amount payable is when you take into account the interest.
The repayments need to be affordable to your business.
As you can see, there are so many things that need to be considered when seeking a commercial mortgage. By using the services of a commercial loans broker like ourselves, we will take all the above things and any other factors into consideration to ensure that the package that is put in place is the most suitable for you.