What is a Commercial Mortgage?
A commercial mortgage is a loan secured against a property that is intended for business use, rather than as your personal residence. They function similarly to residential mortgages but are assessed on different criteria and are offered by a more specialist pool of lenders.
There are two primary types of commercial mortgages:
- Owner-Occupier Commercial Mortgages: These are used by business owners looking to purchase or remortgage the premises from which their business operates, for example, an office, workshop, warehouse, or retail shop. Lenders will typically provide up to 75% Loan to Value (LTV) for an owner-occupier mortgage, assessing affordability based on the business's profitability (EBITDA).
- Commercial Investment Mortgages: These are used by investors and landlords to purchase property that will be rented out to other businesses. This could include a House in Multiple Occupation (HMO mortgage), a block of flats, an office building, or a retail unit. For these, lenders usually offer up to 65-75% LTV, with affordability based on the potential rental income the property can generate.
Why Use a Commercial Mortgage Broker?
Navigating the commercial mortgage market can be complex and time-consuming. Unlike the residential market, many of the most competitive lenders are not on the high street and do not deal with the public directly. A specialist commercial mortgage broker like Clifton Private Finance is essential for securing the best possible terms.
- Access to the Whole Market: We have access to high street banks, challenger banks, and specialist private lenders. This ensures you see every suitable option, not just a fraction of the market.
- Expertise in Complex Cases: Whether you have a complex income structure, are purchasing a non-standard property, or are an expat investor, we have the experience to package your application for success.
- Saving Time and Hassle: We handle the entire process for you – from the initial fact-find and lender negotiations to managing the paperwork and liaising with solicitors. This frees up your time to focus on running your business.
- Securing Better Terms: Our strong, established relationships with lenders and our in-depth market knowledge allow us to negotiate on your behalf for more favourable interest rates, lower fees, and more flexible loan conditions than you could likely achieve on your own.
The Commercial Mortgage Application Process
While every case is unique, a typical commercial mortgage application follows a clear path when managed by one of our brokers:
Initial Enquiry & Consultation: You discuss your requirements, business, and property details with one of our specialists.
Fact-Finding & Documentation: We work with you to gather the necessary documents, such as business accounts, proof of deposit, and details of the property.
Lender Matching & Negotiation: We use our market knowledge to identify and approach the most suitable lenders for your scenario and negotiate indicative terms.
Decision in Principle (DIP): We secure a DIP from the chosen lender, giving you the confidence to proceed with your purchase.
Formal Application & Valuation: We submit the full application, and the lender instructs a formal valuation of the property.
Underwriting & Mortgage Offer: The lender's underwriting team assesses all documentation and, once satisfied, issues a formal, binding mortgage offer.
Legal Process & Completion: Solicitors for both sides complete the legal work, and the funds are released to complete your property purchase.
What Properties & Scenarios Do We Cover?
Our independent mortgage broker service is designed to handle a vast range of scenarios. We can arrange both short-term property finance (like bridging loans) and long-term lending options for almost any requirement, including:
- HMOs (Houses in Multiple Occupation)
- MUFBs (Multi-Unit Freehold Blocks)
- Mixed-Use Properties (e.g., flats above a shop)
- Semi-Commercial Properties
- Retail Units & Offices
- Warehouses & Industrial Units
- Land for Development
- New Build Developments
- Holiday Lets & Serviced Accommodation
- Pubs, Restaurants & Hotels
How Much Can You Borrow?
The amount you can borrow for a commercial mortgage depends on several key factors:
- Loan to Value (LTV): As mentioned, we can source commercial mortgages up to 75% LTV in most cases, but this can sometimes be higher, potentially up to 90% depending on the strength of the application and business case.
- For Investment Property: The loan size will be determined by the property's rental income. Lenders will apply an Interest Coverage Ratio (ICR) stress test to ensure the rent can comfortably cover the mortgage payments, typically by 125-145%.
- For Owner-Occupied Property: The loan size will be based on the trading business's profitability. Lenders will assess your net profit or EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortisation) and apply an income multiplier.
- Deposit & Experience: A larger deposit and a proven track record as a business owner or property investor will strengthen your application and can help you secure a larger loan on better terms.
Our Commercial Mortgage Broker Service
Here at Clifton Private Finance, we pride ourselves on delivering a professional, efficient, and transparent broker service. We are your partner in property finance, dedicated to achieving your business's goals. Our independent service offers:
- Access to the whole market: We compare most UK lenders who are prepared to provide commercial mortgages.
- Bespoke Finance Structures: We can arrange both short-term property finance and long-term lending options, tailoring a solution that fits your timeline and objectives.
- High LTVs: We can source commercial mortgages up to 75% of the property value (and in some cases, higher).
- Speed: When a quick completion is needed, we can secure funding swiftly to ensure you don't miss out on an opportunity.
