Commercial Mortgages

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 Commercial mortgage is a type of loan secured against a property that is used for business purposes rather than residential. Here are some key points to understand about commercial mortgages

What is a Commercial Mortgage?

Purpose: These loans are designed for properties that generate income or are used for business activities, such as offices, retail spaces, warehouses, or industrial buildings12.

Types: There are two main types of commercial mortgages:

Owner-occupier mortgages: For businesses that intend to use the property as their trading premises.

Commercial investment mortgages: For properties that will be rented out to generate income1.

How Do They Work?

Loan Amount: Typically, commercial mortgages cover 70-75% of the property’s value, known as the loan-to-value (LTV) depending on the lender's criteria..

Repayment Terms: can be short or long term depending on the lender's criteria

Interest Rates: Interest rates on commercial mortgages are generally higher than residential mortgages due to the higher risk involved.

Benefits

Tax Deductible: The interest paid on a commercial mortgage is often tax-deductible.

Capital Growth: If the property increases in value, the business’s capital can also grow.

Considerations

Higher Interest Rates: Commercial mortgages typically have higher interest rates compared to residential mortgages.

Fees: There may be additional fees such as arrangement fees, valuation fees, and early repayment charges.

When to Use a Commercial Mortgage?

Purchasing Business Premises: When a business wants to buy property for its own use.

Expanding Property Portfolio: For businesses looking to invest in rental properties.

If you have any specific questions or need further details, feel free to ask!