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Remortgaging Commercial Property

Are you keen to remortgage a commercial property to secure favourable interest rates or release equity for a new project? Read on for guidance about how to ensure your remortgage application is approved.

Almas Uddin
Almas Uddin

Founder and Mortgage Advisor

Almas Uddin2024-06-15
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Commercial Property Remortgage Options

Commercial lending is a crucial cost for businesses and a mortgage is often one of the largest outgoings an organisation may have.

The Revolution Brokers team regularly deals with enquiries looking at commercial property remortgage rates and financing options for companies that want to minimise their interest costs.

If you'd like more information about remortgaging commercial mortgage products to raise finance or compare the relative pros and cons of different forms of lending, get in touch!

The mortgage brokers team is an independent, whole-of-market broker on hand to offer professional support. Call us on 0330 304 3040 or email [email protected].

How Can You Remortgage Commercial Property?

There are plenty of options of refinancing commercial property and the process itself works similarly to remortgaging a residential home.

You are essentially switching from either your existing lender to another, with the same business property as security against the lending.

Remortgaging is an excellent option for changing to a mortgage lender with a more competitive deal. A commercial remortgage can also help you renegotiate your lending with the same provider.

If you decide to change to a new lender, you'll still need to go through the eligibility assessment and affordability processes.

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What are the Benefits of Applying to Remortgage Commercial Mortgage Products?

Businesses remortgage for many reasons:

  • Finding better deals with an alternative lender. Fixed-rate deals may offer a far more competitive mortgage rate than a variable rate. In many cases, businesses seek to refinance when their fixed rate comes to an end, and they are due to switch to a less competitive standard variable rate.
  • Releasing equity. If you need capital for the business, to repay debts, or to finance an expansion, releasing equity from your commercial property by remortgaging is one of the most cost-effective options.
  • Taking advantage of increasing property values. If your commercial premises have appreciated since you took out your mortgage, remortgaging can release capital against the current valuation as a cheap way to finance new activities.
  • Change the type of commercial mortgage. Suppose your business has an owner-occupier mortgage and wishes to move, and rent the premises to a tenant. In that case, you can switch to a commercial investment mortgage and use the rental income to finance the repayments.

How Much Can You Remortgage Commercial Property For?

The usual criteria apply, so before a lender offers a remortgage, they'll want to check you can afford the repayments.

There are no fixed limits on how much you can borrow since a commercial mortgage is bespoke to the application scenario. The lender will look at the operating profit of the business to analyse affordability.

In some cases, a lender may consider other income streams where the net operating profit isn't sufficient to comply with their affordability criteria.

What Are the Average Commercial Property Remortgage Rates in the UK?

Rates vary significantly between lenders and depending on the business, sector, and property.

The main factor is the risk, and how likely the lender feels that they are to receive complete repayments across the remortgage term.

Risk factors include:

  • The Loan to Value ratio - i.e. how much you are borrowing against the value of the property. Some lenders cap LTV at 60%, whereas others will go up to 75%. In any case, the higher the LTV, the higher the risk and the higher the rates.
  • Credit rating - if you have bad credit, this increases the risk profile and therefore raises the interest rates likely to be quoted. In this scenario, the best option is to consult a broker who can recommend a specialist bad credit commercial lender.
  • Company trading - if you have been trading for two or three years and have a good track record, you are a stable applicant and will be offered favourable rates. However, new businesses and start-ups can still remortgage company properties through an experienced broker.
  • Business sector. Where companies have a good reputation and strong track record in their industry, they can expect to receive better mortgage rates.

Established businesses with good credit, a long trading history, a reasonably valuable property and a thriving business sector will attract more competitive rates than newer companies, or those without a profitable trading record.

What Is the Difference Between Business Refinancing and a Commercial Remortgage?

 

Business financing refers to any lending secured against a business asset either to raise finance or repay other liabilities.

This type of lending can include asset financing, whereby you can leverage any company asset, such as cars or equipment, and raise capital against them.

Similarly to an existing mortgage, the capital is secured against the asset, and the lending is repaid along with interest over the term of the asset finance agreement.

Asset finance can be a quick alternative to remortgaging, and takes less time to organise than a mortgage, although a valuation is very likely to be required.

Can I Use a Commercial Property Remortgage to Refinance my Business Debts?

Most businesses will have debt from time to time, and refinancing the debt can reduce your monthly payments, cut back on repayment values, and make borrowing more manageable.

Suppose you wish to consolidate or refinance business debts. In that case, the best route is to consult an experienced commercial broker, such as the Revolution Finance team, to receive independent advice about the most advantageous options in your circumstances.

Can I Remortgage Commercial Property to Refinance a Business Loan?

Indeed you can - commercial debts are like any other form of borrowing and can be refinanced through mortgage or asset finance.

Most unsecured business loans are up to a cap of £25,000, although a broker can secure higher loan values.

If you have equity in your business premise because it has appreciated, you have invested in the property, or the business has paid back some of the original loan, a commercial remortgage can release financing to pay back other debts.

Can I Get a Commercial Remortgage Bad Credit?

Commercial financing is available in a bad credit history scenario.

Still, the lender will need assurances, such as a valuation demonstrating that the LTV on the mortgage is low, a higher deposit, or personal guarantees from the business directors.

A lot depends on the value of the remortgage commercial agreement, what the investment property is worth, and how much risk the lender perceives they are taking on if they offer you a commercial remortgage agreement.

What Are the Remortgage Commercial Bad Credit Eligibility Requirements?

Fortunately, commercial remortgages are more flexible than residential refinancing, so there is a greater likelihood that you'll be able to release capital in your property to invest in other projects.

Lenders will typically charge higher interest rates, command a more substantial deposit, and require greater scrutiny of the business financial records to offset any potential risk of a bad credit record impacting your ability to repay the debt.

How Do I Remortgage Commercial Unsecured Company Loans?

The key here is to work out which lenders to apply to and how to meet their eligibility requirements.

Lenders will consider:

  • Your credit rating.
  • How long the business has been trading
  • The profit levels of the company.
  • Your ongoing business plan.
  • How many other liabilities are outstanding

To refinance a company loan, a whole-of-market specialist broker is far and away the most secure option, with independent advice about the different forms of lending based on what you'd like to consolidate.

Some lenders will only accept business applicants with at least two years of trading history, whereas others specialise in new business financing.

They could also require a copy of the loan statements to check whether you've kept up with the repayments over the last six months.

Can You Remortgage a Commercial Property to Raise Capital?

You can choose a commercial remortgage to release investment equity in the site to raise the financing you need for another business project, such as buying new equipment, hiring more staff, or raising working capital.

The lender will ask why you wish to apply for a remortgage commercial product and may need a copy of your business plan.

Business plans show how much you want to borrow on a commercial remortgage, what you will do with the proceeds, and help the lender decide whether your objectives are financially viable and likely to succeed.

What are the Benefits of Refinancing Unsecured Business Loans Through a Commercial Remortgage?

The benefits all depend on your business, how much you are paying, and what changes you wish to make to your expenses and cash flow.

If you have a rating, for example, it might be best to keep the mortgage as it stands, as a new lender would not be able to offer better rates if your credit score has declined since you took out the original loan.

You might also be liable for steep repayment penalties if you are within an initial period of the loan.

Should you be considering refinancing options and need professional support making the right decision, contact Revolution Brokers on 0330 304 3040.

Is it Best to Get a Business Loan or Commercial Remortgage?

The most cost-effective option depends on why you're borrowing, and how much you need:

  • If you want to remortgage to raise a small amount of capital, a loan could be faster and cheaper.
  • If you have excellent mortgage rates, you might choose a loan to protect your interest rates if a competitive deal isn't available on the current market.
  • A remortgage tends to cost more to organise than a loan, given the need for solicitors and property valuations.
  • Should the business have been turned down for a remortgage, a loan may be a viable alternative.

How Can I Refinance Debt for a Small Company Through a Remortgage Commercial Agreement?

The rules don't change depending on the size of the business premises, so if you're looking for refinancing, the same eligibility criteria will reply as for a more significant organisation.

Small commercial mortgages carry similar eligibility requirements to any other commercial investment properties remortgage.

Lenders will want to assess your trading figures, property value, business plans and future projections and will sometimes require additional security such as personal guarantees from the company directors.

Professional UK Advice with Commercial Remortgages

Whether you want to explore more competitive rates on the market or work out the best way to refinance business debt, the Revolution Brokers team is on hand to help.

Almas Uddin
Almas Uddin

Founder and Mortgage Advisor

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Frequently Asked
Questions

Yes, a commercial remortgage is used to pay back an existing mortgage, raise additional finance, reduce monthly outgoings, or consolidate other debts into a lower regular cost.

Commercial property remortgage products are commonly used to release equity, particularly where the business plan involves investing in other projects.

Much as you can remortgage a residential home and apply for slightly more than you need to pay back the current debt, a commercial remortgage can release equity for a wide range of reasons.

Commercial remortgage lenders may wish to review your business plans and ask what you want to do with the additional finance.

Any commercial remortgage or lending product will be more expensive in terms of arrangement fees and interest costs than a comparable residential mortgage.

However, choosing to remortgage commercial debt may mean reducing your expenses by remortgaging onto a product with a lower interest charge.

If you wish to remortgage commercial property, you'll find that most of the process is similar to a residential mortgage.

You can take out a mortgage to buy a trading premise or an investment property to let out through your business.

The most common reasons to remortgage are to find a better deal, remortgage commercial products that have come to the end of a fixed contract, or borrow a larger amount against the increased value of your business premise.

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FCA disclaimer

The content included in our articles, blogs, web pages and news publications is based on information accurate at the time of writing. Note that policies and criteria can change regularly throughout the UK mortgage lending market, and it remains essential to contact the consultation team to receive up to date guidance. The information included on the Revolution Brokers site is not bespoke to any circumstances or individual application scenarios and therefore is not intended to be used as financial advice. The content we share is designed to be informative and helpful but cannot be relied upon to provide individual advice relevant to your mortgage requirements. All Revolution team members are fully qualified, trained and experienced to provide mortgage advice of an independent nature.

We collaborate with lenders and providers who are regulated, authorised and registered with the Financial Conduct Authority (FCA). Should you require specific mortgage borrowing types, some products such as buy to let mortgages may not be FCA regulated. The Revolution team can provide further information about regulated and unregulated lending as required. Please remember that a mortgage is a debt which is secured against your home or property. Your home can be at risk of repossession if you do not keep up with the repayments or encounter any other difficulties in managing your mortgage borrowing responsibly. This also applies to any remortgage or home loan secured against your property, including equity release products.

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