You may be an expert in your business, but as a commercial mortgage seeker, you may lack the expertise, as it is not your playground. The mortgage industry sounds complicated to most borrowers on the part of formalities, procedures, etc. It generates the need to take a few things under consideration before making a commercial mortgage.
Here are the essential things that you should ALWAYS go through before making a final decision on commercial mortgage borrowing.
Decide your purpose
Did you know that you cannot just go and apply for any commercial mortgage deal? The product has varied types, according to the target. You need first to decide what is your reason for applying for a mortgage.
The prime purposes that commercial mortgages solve are –
- Commercial buy-to-let
If you want to buy a commercial property to rent it out to other business owners for commercial use, this category is applicable.
- Residential but-to-let
When you purchase a property and rent it out for residential use, as an applicant, this should be your category to apply for a commercial mortgage.
- Owner- occupied
As it is understandable by the term, when you as the owner occupy a property, it falls under this category. It is also one of the most common types.
First, decide your purpose and then search for a good deal in the desired direction.
Did you confirm the deposit amount?
Commercial mortgages always have a higher deposit amount and may need you to make the extra effort to gather funds. Usually, the minimum percentage is 25%, but according to the market’s financial conditions, it may go up. Also, the lending policies of the mortgage providers may present varied down payment requirements in front of you.
The businesspersons always struggle to gather the funds for the down payment. A timely indication of a situation always helps make better preparation to qualify for a business mortgage. The current scenario communicates the need for a bigger deposit, which may sound complicated but borrows less on the mortgage. A smaller mortgage causes a lesser burden of a mortgage, and you can achieve financial liberty.
Do research on the significance of a commercial mortgage broker
You may not be very convinced about hiring a broker, as they are considered an expensive option. However, if you study the market, the brokers are not insignificant because they become the platform of doing many things together.
How do brokers help?
- Broker find mortgage deals for you from the abundance of options in the market
- Get them customized to match a mortgage from your financial conditions
- Bargain on the interest rates to keep the deal affordable in repayments
- Take care of the hefty mortgage procedure. You do not need to break your routine work
- They help in problems like poor credit issue with deals such as bad credit mortgage
It should be so convenient for a mortgage broker to have so many things at the same place. Take your time, talk to the borrowers who took the broking services. They can give you many valuable lessons.
Know the right procedure if you are a UK expat
Your nation is the United Kingdom, but currently, you live in another country and want to buy a property in the UK. Well, commercial property investments are quite common among the UK expats. But for them, the procedures of commercial mortgage are different. Before you apply for the loan, gather all information about how things work and what can be the challenges.
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An insight into the commercial mortgage basics for expats can make you make less or no mistakes while applying for the funds. Usually, most of the lenders offer a rate of interest of 5% above the Bank of England base rate. The popular LTV percentage is 65%, and the maximum goes up to 75%. However, the current scenario after covid-19 has created challenging conditions, and the applicants have to own big equity and a bigger deposit.
Keep the accounts organised
Lenders are always super cautious when they scrutinize the financial details and accounts of the applicant. A business person has volatile income (as we all know), one month profit other month loss.
Hire an accountant to keep the files and documents organised with the latest entries. The accounts signed by a professional accountant have more weight in importance than those managed unprofessionally. Only a person authorised from the UK Government is always a better option.
The above points are the preconditions, and it is better if you keep them in mind before applying for a commercial mortgage. The businesses all across the UK are down. The market is cold all across the globe, and the commercial mortgage policies of the lenders are stringent. If the residential mortgage providers can ask for 25% equity for a residential mortgage, then you can imagine conditions for the commercial deals.