Before entering into a purchase of a business or a commercial property, it's really important to arm yourself fully with the knowledge you'll need to do it justice. In this blog we'll be delivering our guide to a business mortgage.
If you've only dealt in residential mortgages up to now, you'll probably have been used to dealing in timescales of 25-30 years. Your average commercial property weighs in on a somewhat smaller scale, averaging in length from 10-20 years.
Another massive difference between this and your residential mortgage is the deposit required by the bank. On a residential property it's not unheard of for a bank to dole out a 100% mortgage, with no deposit. However, this doesn't happen with a business mortgage. You'll have to pay at least a 20-30% deposit.
The paperwork is the next massive difference between the two. A commercial mortgage requires extensive paperwork. Documents required include: audited accounts, current performance review, bank statements for the last six months, and a detailed business plan.
There are also a host of charges that this type of mortgage will incur that aren't seen in a residential deal: admin charges, mortgage arrangement fee, lender's solicitors fees, early repayment charges, and possibly even a full structural survey fee.
We highly recommend getting specialist commercial property legal advice before entering into one of these contracts, as they often have a lot of clauses that can catch you out. So make sure you've done your sums before considering applying for a commercial mortgage!