Commercial property is a specialist market that requires an experienced broker like DNA Financial Solutions to help facilitate introductions and applications with the correct lenders. Whether its land, retail units, franchise or a portfolio of buy to lets, commercial mortgages can be an excellent way of expanding the business use of property.
Commercial property finance or commercial mortgages can also be referred to as a business mortgage, commercial property finance is a type of mortgage secured to buy a property that is not your place of residence. Commercial loans usually involve larger amounts, and thus lenders require security as a form of risk management.
Commercial mortgages can last for as little as 3 years or for as long as 25 years, and borrowers can get up to 70% to 75% mortgage. Since a commercial property is an investment, the amount you are eligible to borrow is determined by the potential rental income of the property without exceeding 65% of the property purchase price.
Taking out commercial property finance
There are some differences between a regular mortgages and commercial property finance. These differences include:
- Commercial property financing does not usually have a fixed rate option
- The interest rate on commercial mortgages is typically higher than that of a regular home mortgage. This is because commercial property borrowers are considered to be high-risk clients.
- Commercial property financing has better interest rates when compared to regular home financing.
- Commercial property finance or mortgages cannot be used for residential purposes.
Why you should take a commercial property finance
- Interest on commercial property financing is tax-deductible
- Your capital increases when your property increases in value
- You can rent the property to generate income, typically commercial tenants remain in situ longer than residential
Applying for commercial property financing
The market is flooded with brokers and lenders for commercial property financing. Hiring a specialist like DNA Financial Solutions can ensure you are connected with the best lenders for your project.
The application process works in the same way as taking out a regular mortgage. You will need to submit a filled asset and liability form. This can be done digitally. You also need to complete a commercial property financing application. Information about your business should be availed and a valuation of the property needs to be undertaken.
The financing institution will contact you with an offer once your application has been successfully submitted and approved.