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Getting started with commercial mortgages

Commercial mortgages are an incredibly versatile property finance type, which, while useful, can make it difficult to know where to start. 

There are two main types of commercial mortgages:

Commercial investment mortgages are for property investors who want to let out a commercial property to other businesses. Commercial properties are a profitable asset to have in your property portfolio and can range from small shops to multi-story office blocks or warehouse units, and many things in between. 

Commercial owner-occupier mortgages are for business owners who want to run their own business from the property. By owning your premises, you’ll benefit from any value increases, save on rent and have more security over your location. You’d also use an owner-occupier mortgage if you’re purchasing an existing business with the property.

If you’re purchasing or remortgaging a property with commercial and residential elements, for example, a shop with flats above it, you’ll need a semi-commercial mortgage. Semi-commercial mortgages can be for investment or owner-occupier purposes, but will come with different regulations and pricing than standard commercial mortgages.

Frequently asked commercial mortgage questions…

Your Commercial Property Types

Commercial property typically refers to any property which contains a trading business but can also include large residential rental properties like blocks of flats, and land that generates an income. With such a broad spectrum of property possibilities, commercial mortgage lenders have varying approaches and appetites for different properties and business types. At MFB, our specialist commercial team has dealt with almost every commercial property and business type. However, here are some of the sectors we deal with most often:

  • Retail (e.g., shops and high street services)
  • Large residential (e.g., MUFBs)
  • Hotels
  • Hospitality (e.g., Pubs and Restaurants)
  • Childcare businesses
  • Care-homes

Can I get a commercial investment mortgage with no letting experience?

Lenders prefer commercial investment borrowers to have some letting experience before considering your application. Letting out residential property is a good place to start, as this comes with less risk than commercial property. However, commercial lenders are more likely to consider applications on a case-by-case basis, so if you want to get into commercial property investment, call us.

How much are commercial mortgage rates?

Commercial mortgage interest rates vary depending on many aspects, including property type, business sector, loan to value (LTV) and you, the borrower. The best way to get an accurate idea of how much a commercial mortgage would cost for your circumstances is to speak to one of our experts.

What fees do commercial mortgages have?

Like most mortgages, commercial finance does come with additional fees you’ll need to consider and factor into your costs. These include (but are not limited to): 

  • Lender arrangement fee – usually 1-2% of the loan amount. Depending on the lender, you will either pay this upon completion or include it in the loan. 
  • Valuation fee – the cost of this will depend on the property type, location and value. You’re usually expected to pay the valuation fee during the application process.
  • Legal fees – this will depend entirely on the solicitor you use and your case's complexity.

Talk to an expert

We handle all types of commercial mortgages, from commercial investment and owner-occupier to semi-commercial. Our experts are eager to help with your future aspirations. Just get in touch through our channels.

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