Commercial Investment Mortgage
Commercial Investment Mortgage | Does It Make Sense For You?
If you are considering a commercial investment mortgage, you will want to know what you are getting into. If you have previously been a buy to let landlord, you may find some differences with a commercial investment mortgage. A commercial mortgage might suit someone who is ready to move out of the residential sector and invest in other kinds of property.
The type of property that might be subject to a commercial investment mortgage might be office buildings, retail outlets, industrial spaces, warehouses, manufacturing plants and serviced offices. There are many lenders who specialise in this area and will offer a mortgage for this type of property.
Moving into the commercial sector may mean that former BTL landlords find that there is more flexibility with a commercial mortgage. With large sums of money being invested, lenders may be more willing to provide a commercial investment mortgage that is tailored to the investor's requirements.
And the sums of money involved can be very large indeed. Mortgage lenders will generally provide loans from £100,000 to as much as £25 million. Mortgage types for a commercial investment mortgage can include different types of repayment structures. As well as the familiar interest only repayment method that many BTL landlords are familiar with, there are also bullet mortgage repayments, hedged mortgage structures and partial amortisation with some commercial mortgage deals.
Similar to buy to let mortgages, the typical loan to value for a commercial mortgage is between 50 per cent and 75 per cent loan to value, based on the value of the property. Some lenders even provide a commercial mortgage at 100 per cent loan to value, though additional security may be required for the loan.
Who Can Have A Commercial Mortgage?
A commercial mortgage is available to both individuals and companies who wish to buy a business property as an asset. There are several sectors that can be served by such a mortgage. As well as those listed above, investors can also get a commercial investment mortgage for the agricultural and leisure sectors.
Just as with standard BTL there are a variety of commercial mortgage deals available for borrowers who have unique circumstances. This could be for applicants who generate their income from overseas or for applicants who wish to structure their commercial mortgage deal in a Special Purpose Vehicle (SPV).
Because commercial mortgage deals are tailored to each applicant, it is difficult to give examples of typical rates, for example a rate of 1.75 per cent above LIBOR is not uncommon. However, anyone who is seriously considering a commercial mortgage should seek advice from a professional broker.
As with other property investment, investment in commercial property should be seen as a medium to long term deal. It will take some time before investors see any growth in the capital value of their property. In the meantime, the rental income should be more than enough to repay the commercial investment mortgage.
