IMB Blog

Commercial Mortgage Rates

If you’re struggling to obtain good terms in regards to commercial mortgage interest rates then you ought to do yourself a favour and give the dedicated commercial mortgage brokers team a call at Independent Mortgage Brokers based in Halifax. Rates will vary quite dramatically from lender to lender and usually the terms offered by the commercial mortgage lenders will be based upon your individual requirements, all commercial mortgages lenders have robust and sometimes strict underwriting procedures. The commercial mortgage lenders will assess your ability to lend usually using some in house affordability assessment, this can vary from commercial lender to another. It would always be wise to speak to specialist commercial mortgage broker. In general, commercial mortgage rates in the UK are determined by a thorough analysis of your business, this would usually be using your trading accounts for reference of past performance of your business. Lenders are likely to analyse your past performance rigorously. Your accounts should be public record and can be easily downloaded from HMRC for reference. Your accountant would usually file these accounts and make the necessary payments in regards to taxation to HMRC. The commercial mortgage lender may want to check the current trading position and long-term plans of the business (or the one you’re considering purchasing) before deciding viability and quoting an interest rate. A general rule of thumb to consider here is if the business is trading from a good sound stable position, then the interest rates are likely to be better to reflect the quality of your business. If the trading accounts or the business isn’t turning over too much maybe your accountant is being more tax efficient then a lender will look less favourably at this, as it could be considered higher risk and therefore your commercial mortgage interest rates may be considerably higher. Running a business is not as simple as a one size fits all scenario, many businesses, trade perfectly well but there may have been circumstances that have affected the most recent or previous trading accounts. Therefore, choosing to take on commercial mortgage finance is extremely bespoke and must be underwritten organically, rates could be potentially negotiable rather than set in stone, but the likelihood is they may be higher if the underwriter identifies higher risk in the proposal.

Commercial mortgage rates tend to be variable and are often based on the Bank of England base rate. They’re typically quoted as “X% over base rate”, similar to tracker mortgages in the residential arena. A number of investment commercial mortgages these days are available with rates that are fixed, but these are not the norm. A suggestion would be to discuss the specific terms of the commercial mortgage offered by the lender with your independent mortgage broker, who will run through the merits and pitfalls of each induvial commercial mortgage deal.

Things to consider if you’re using a commercial mortgage broker

  • Your independent mortgage broker must have a comprehensive knowledge of the commercial mortgage sector.
  • Your independent mortgage broker must have the necessary professional commercial mortgage contacts to guide your business to the right commercial deal.
  • Your independent mortgage broker must have the skill set in order to present your case to the commercial lender in the best possible format.
  • Your independent mortgage broker must have you and your business interests at the forefront of their mind. You must have confidence in their ability.

Without any doubt at all the commercial mortgage sector is incredibly complex, and this is reason enough in itself to use a commercial mortgage broker. Not only do they have expert knowledge of the commercial mortgage arena, but they also have the professional contacts to help you and your business find the best commercial mortgage deal. Using the right independent mortgage broker should provide access to many finance options, it may be that if you attempted to find the deals yourself you may not be able to find the deals on your own.

It goes without saying that you need to be fully co-operative in all dealings with your independent mortgage brokers, after all it is your commercial mortgage broker that will be the one presenting your case to the commercial lender on your behalf of you and your beloved business, and don’t use multiple independent mortgage brokers at once, as you could end up messing the whole deal up all together, and may result in you not obtaining any kind of deal at all. Make sure you’re vigilant and look for independent mortgage brokers who are members of the National Association of Commercial Finance Brokers (NACFB, the professional body of the industry), as they’ll have the necessary professional indemnity insurance and are required to stick to a code of practice, ensuring a thorough and professional service.

Fees and charges

Commercial mortgage lenders usually charge a fee. These are typically 1-2% of the loan amount (but for smaller loans they may be higher), and are usually added on completion of the loan.

Commitment fees

Many commercial lenders will also charge alongside the arrangement fee too. Some commercial lenders will charge a ‘commitment fee’ in order to cover the work they undertake if you don’t accept the offer. This is usually non-refundable and will usually be payable upfront as part of your formal application.

Valuation fees

Your independent mortgage broker will also be making you aware of another fee called a valuation fee, this without doubt will be required as part of your application process. Many of the reports offered by the lenders are basic reports, mainly to make the lender a little more comfortable with the commercial lending, although your commercial mortgage lender should be able and will often offer a more in-depth report. Regardless these commercial valuations will be much more in-depth reports than the residential sector. The cost can vary depending on the complexity of the property and the case itself, and much like the eventual mortgage rate, are based on a bespoke quotation. Usually, your commercial mortgage broker will prepare at least a couple of options for you, maybe with different potential dates to survey or value the property. They usually differ vastly in price, and can hurt the back pocket should you retain the services of the wrong valuer. Always best to check thoroughly with your independent mortgage brokers before committing to the expense of a valuation.

Solicitors’ fees

Yes, you guessed it when arranging a mortgage for a commercial property, you’ll be required to pay your lender’s solicitors fees as well as your own, with the eventual price again determined by your individual case.

Broker fees

A very important fee to pay is your broker fee as we already illuded to, using an independent commercial mortgage broker can be a great way to access the best commercial terms, but you’ll need to pay for the privilege; you can expect fees of up to 1 – 3% of the loan value, arranged when they’ve found you a commercial mortgage based on your pre-agreed terms.

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Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of our Independent Mortgage Brokers to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisers working for or with Independent Mortgage Brokers are fully qualified to provide mortgage advice and authorised and regulated by the Financial Conduct Authority. All our independent Mortgage Brokers will offer advice specific to you and your needs and circumstances. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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