A commercial mortgage is a loan secured on property that is not your residence. This type of mortgage is mainly used by businesses and for business purpose.
So over 85% of the UK businesses are either Sole Trader or Micro Business.
Key Features of Taking out A Commercial Mortgage.
- There are usually no fixed rates unless agreed with the lender
- There is a high interest rate
- Commercial mortgages tend to offer better interest rates than regular business loans as these require property as collateral
Types of commercial mortgages.
- owner’s occupier mortgage: this is used to buy property that will be used as trading premises for your business
- Commercial investment mortgages: this is used for property you’re planning to let out.
Surveyed 1,995 adults, data sourced from Mintel, accurate as of April 2019
Points to consider.
- You may be able to get a mortgage if you have a bad credit rating but this does mean that you will have to pay a higher interest rate.
- The deposit for this kind of mortgage can be quite a lot so you must make sure that you are able to pay both deposit and the monthly repayment comfortably (Average 25%).
- If you haven’t been trading for long the lenders may take this as a sign of high risk and will ask for a personal guarantee.
- The interest on your commercial mortgage is tax-deductible