Commercial
Mortgages
& Property Finance
If you’re looking to purchase or refinance a property your business trades from, a single commercial investment property, or a portfolio of investment properties, let Swoop do the hard work for you. Our team of experts will present you with all the options that are available to you for commercial mortgages, business mortgages and property investment loans.
What is a Commercial Mortgage?
A commercial mortgage is a type of loan provided by a lender to a borrower that is secured by a legal charge over commercial property. Mortgages are attractive products which can be used to achieve a wide range of objectives such as contributing towards the purchase of commercial property, releasing equity to grow or invest in your business, refinancing to benefit from a lower interest rate or monthly repayments and consolidating existing debts into one manageable monthly payment.
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What types of Commercial Mortgages are there?
There are three types of commercial mortgage:
- Owner-Occupied Commercial Mortgage
- Commercial Investment Property Mortgage
- Property Portfolio Loan
Owner-Occupied Commercial Mortgages are provided to businesses that trade from and own the property they wish to borrow money against.
Commercial Investment Property Mortgages are provided to property owners who are investors and receive a rental income from a third party tenant or licensee. In most scenarios the rental income the property generates is used to repay the debt over a period of time.
Property Portfolio Loans are provided to property professionals and investors. The lender will take some or all of the clients property investments as security (this may be residential, commercial or mixed use property, or a combination of all within the portfolio) and provide one loan, assessing serviceability by aggregating the total income from the portfolio to meet the proposed loan repayments.
Typical features
Commercial mortgage criteria vary massively from lender to lender. Unlike residential mortgages that are usually fixed ‘off the shelf products’, commercial mortgages are tailor made solutions to help an SME or Property Investor achieve their goal/s.
The interest rate for a commercial mortgage is determined by a lenders perceived risk of the lend. Lenders will usually have a range, say 3%-5% above base rate, the higher the risk, the closer to 5% above base rate you will be. Other major factors considered by lenders are affordability – does the business generate sufficient income or profit from sustainable sources to repay the loan. And the LTV, as a percentage, what is the lenders exposure vs the value of the property/business they are taking as security. Longer term loans can also be perceived as higher risk, as confirming whether the income used to repay the loan is sustainable for the long term is difficult for lenders.
Once similarity commercial and residential mortgages have is that there are both variable rate loans and fixed rate loans. The offering however varies from lender to lender.
Commercial mortgages are viewed as higher risk compared to regular residential house mortgages, therefore higher interest rates are typically charged. However, commercial mortgages often offer better interest rates than traditional business loans, as the lender has the security of the commercial property in case of loan default.
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