Almas Uddin
Founder and Mortgage Advisor
23 Apr 2020
Large Commercial Mortgages – the Best Options
With an ever-changing market, it is important to consult an expert broker to achieve the most favourable terms and interest rates available for larger mortgage requirements, whether for commercial premises or dual-use properties.
Mortgage lenders base their offers on a combination of associated risk, the current business climate in the relevant sector, and the level of financing required.
What Constitutes a Large Mortgage?
A large mortgage is usually considered as lending beginning at £500,000, but can extend well above this.
Long-term Lending Terms
Terms available vary considerably between lenders and can be from ten to twenty-five years. Using a broker is crucial to analysing the offers available, and selecting the best fit for your investment needs. Revolution Finance Brokers scour the market and remain continually up to date with new products as they are launched, and can assist with negotiations as well as support with the application process and accessing the lending you require.
Typically, the largest lenders do not offer low rates on longer-term lending, due to the prohibitively high cost of finance. The lowest interest rates are available on shorter terms, usually at around five years. After the initial term ends, the investor would then need to find a new mortgaging option, usually at a higher interest rate, or negotiate new terms of the remainder of the mortgage repayable, which can make property investment a costly endeavour.
Should you find yourself in this situation, please give our team a call at 0330 304 3040 and we will be delighted to help you find the best option, to secure your financing on an affordable long-term basis.
Loan Repayments
Mortgages have a variety of options such as interest-only, capital repayment, and a combination of the two. Which you select, and which products are offered, depends on your circumstances and whether you are acquiring property as an investor, or to run your own business from as an owner-occupier.
Most of the largest lenders tend to only offer mortgage terms of over £1 million on a capital repayment basis. For dual-use properties with both residential and commercial spaces, there are usually mixed basis mortgage offers available, with longer-term lending applicable to the residential aspect of the property.
You will find that the largest UK lenders – Barclays, HSBC, Lloyds and NatWest – only offer repayment mortgages, although may put in place a short-term interest-only period to assist with costs such as repairs and refurbishments.
Current Climate
Whilst always subject to change, the most stable business sector to lend to is currently the healthcare industry, with lending most easily available to businesses such as dental practices and pharmacies.
Childcare also remains a stable investment market, and longer-term lending up to twenty-five years is usually achievable depending on the anticipated retirement age of the applicant. Lending criteria remain strict when considering investment acquisitions in the care industry, retail and leisure business sectors.
With fluctuations to the property market and the available pricing of premises in London, there are more opportunities than ever to secure the freehold of a property for owners currently occupying their premises on a leasehold basis. If you have the chance to purchase your freehold, give us a call to see how we can help you achieve your aspirations!
Should you be running a business with a good track record, and be considering remortgaging to reduce your outgoings and interest costs, give us a call or drop us an email at any time and we will identify the most cost-effective solutions for you.
Interest Rates
Rates for typical commercial mortgages, say a dual-use property with a loan-to-value ratio of 70%, start at around 2.5% over the base rate, and attract arrangement fees of between 1-2%.
For those businesses operating in the most favourable markets, i.e. the medical, legal, financial or healthcare sectors, there are very lucrative interest rates available on mortgages ranging between £750,000-£2 million, usually beginning at just 1.9% over base rate.
There is also a drive for lenders to demonstrate support for UK production and manufacturing businesses, and so some lenders can offer lower rates and better loan-to-value ratios than seen before on the market, some with little or no security requirements.
Securing a Better Loan-to-Value ratio
Challenger banks are rivalling the high street giants and can offer higher loan-to-value ratios of up to 70-75%.
Interest rates depend on the LTV basis, but for a 55% ratio can be achieved at as low as 3.24% over the Libor average. A 65% LTV mortgage might attract rates from around 3.74% over Libor, alongside an interest-only repayment option.
These rates may be higher for commercial premises yielding over 8.5%, or being acquired solely as an investment acquisition. Lower yields generally return lower cost rates and also vary depending on your location.
For more information, for help securing your ideal lending solution, and for assistance in comparing the products currently available on the market, give the team at Revolution Finance Brokers a call today.
Contact us now to discuss your personal options, Revolution Finance Brokers specialise in commercial and residential finance in Essex, Kent, London and Hertfordshire.
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