Commercial Mortgage Calculator

Deposit requirements depend on how much you are borrowing, but commercial mortgages are typically limited to 75% LTV. So on a £500,000 purchase with a 75% LTV, you would need £125,000 in deposit (additional capital would be needed to cover purchase costs).

Lenders determine their lending limits based on a variety of factors, including:

• The length of the lease and strength of the tenant (for investment properties)
• Your business accounts and trading activity for owner-occupied mortgages
• Credit history (good credit history is not essential to secure a commercial mortgage because it is based on rental income, but it can help to secure better terms)
• The lender's own criteria

A lender calculates maximum LTV and maximum affordability separately, and one cannot exceed the other. So, if, for example, you can borrow a large amount based on the rental calculation, but this exceeds the lender’s max LTV, then only the max LTV will apply. 

On the other hand, if the rental income provides maximum affordability far below the maximum LTV, then the affordability calculation will determine the maximum loan.
your assets used to secure the loan

Commercial mortgages are used to fund the purchase or refinance of a commercial property or mixed-use property.

Examples include:

Care home
Education
Heavy Industrial
Hotel 
Leisure
Licenced HMO
Light Industrial
Medical
Mixed Use (part residential part commercial)
Mixed Use (All commercial)
Multi Unit freehold block
Office
Retail 
Retirement
Student

The key criterion for a commercial mortgage for an investment property is that the monthly rental income exceeds the monthly loan repayments. For owner-occupied mortgages, lenders will typically require a minimum of two years’ worth of trading accounts and business activity to assess affordability.

On top of that, the usual criteria for any long-term financial commitment apply, such as UK residents, aged 18 or over with proof of address, and a credit file.

There are commercial mortgage products for UK nationals living outside of the UK and for foreign nationals, but options are more limited.

When searching for a commercial mortgage on Brickflow, you can filter your results based on the criteria relevant to your circumstances.

The time it takes to secure an approved commercial mortgage varies depending on the lender and the complexity of the loan. Generally, it will take several weeks, and typically takes longer than a residential mortgage. Residential mortgages are often automated, whilst commercial mortgages are processed and underwritten manually, which slows things down.

To speed up the process, prepare your documentation and application as soon as possible and with as much detail as possible to avoid lenders having to come back and ask for additional information. Responding quickly to any lender requests will help.

Also, be upfront about any potential problems, like issues with your credit file, such as CCJs. for A lender that discovers this a few weeks into the process will not just potentially slow things down but can lead to a lender losing confidence in you as a borrower.

Yes, it is possible to secure a commercial mortgage without putting down a cash deposit, but you will instead have to use another property or assets as additional security. Rather than 100% finance, it is really a ‘cashless’ deal. 

If you default on the loan, the lender may repossess any other assets used to secure the loan.

Brickflow’s preferred brokers are experts in commercial mortgages and can help you secure the best loan for your circumstances.  

There are several advantages of a commercial mortgage.

Firstly, the advantages for your business include:

• Investment: Repayments could be less than or similar to monthly rental payments, but your money is being invested into a property
• Stability: Owning your own premises gives you more control over your outgoings and means you’re not subject to a landlord’s decisions, such as rent increases or selling
• Potential rental income: If your circumstances change, you could rent your property out to generate an income
  Better rental yields: Commercial properties will typically produce higher rental yields than residential
• Capital growth: The property could increase in value over the course of your mortgage, generating profit or equity
• Tax benefits and deductions: Interest paid on commercial mortgages is tax-deductible

The advantages of a commercial mortgage:

• Long-term financing: Repaying a loan over a longer-term (up to 30 years) is comparatively cheaper than short-term borrowing, such as bridging loans
• Fixed interest rates: Up to 10 year fixed-rate are available, so you know exactly how much you’re spending per month over a long period
• Capital repayment holidays: A temporary break in capital repayments could be agreed with some lenders (subject to approval, conditions apply, and interest still has to be paid)
• Flexible borrowing: With the rise of challenger banks and non-bank lenders, this type of lending has become much more flexible. Interest only and higher leverage as standard are two examples of the evolution in this space
• Lower interest rates: Usually more competitive than other secured business loans – this is because the lender uses the property as security
• No early repayment charges: Some commercial mortgage products don’t carry early repayment charges
• Borrow with adverse credit: Assessed on a case-by-case basis, but as it is the income that the property earns, rather than you personally, personal credit is less important

Commercial mortgages are typically more expensive than residential in terms of rates and fees, but cheaper than, for example, bridging loans or other secured business finance.
 
The cost has to be weighed against the rental yield of a commercial property compared with a residential property or the rent you will pay for your business premises compared to monthly mortgage repayments. In addition, the potential for capital growth should be considered alongside the expense of a commercial mortgage.