Key Differences Between Commercial and Residential Remortgages
Delving into what differentiates commercial and residential remortgages, it's evident they are distinct. Our experience at Revolution Finance Brokers has taught us the unique factors influencing your choices. To illustrate these differences clearly, we present a straightforward table for ease of understanding.
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Commercial Remortgages
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Residential Remortgages
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Use
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For business purposes like buying new premises or refinancing business debt
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For personal use, like buying a home or securing a better mortgage rate
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Interest Rates
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Tend to be higher due to the perceived higher risk
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Usually lower as they are seen as less risky
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Lending Criteria
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Based on business performance and cash flow
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Primarily focused on personal income and credit history
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Repayment Terms
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Can vary greatly, often adjusted to the business's ability to repay
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Typically fixed terms, up to 25-30 years
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Security
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May require a charge over the business assets
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Usually secured against the residential property
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Valuation Process
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More involved, considering the business's financial health and sector risks
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Generally straightforward, based on property value
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Observing through our expertise, the contrasts underline a fundamental truth: the suitable solution for a homeowner seeking a better deal on their mortgage may not suit a business owner looking to grow or manage debt. Different paths are defined by unique priorities and challenges. Comprehending these is vital to make well-informed choices, and we are here to assist you with clear and focused guidance.
Benefits of Commercial Remortgaging
Switching your mortgage at the end can lead to better terms and savings. We're here to help guide you through this process.
Lower interest rates
Lower interest rates help businesses save money on commercial remortgages. These savings can be used to grow the company or reduce debts faster. Our team has successfully helped many clients find lower-rate loans, resulting in reduced monthly repayments for their commercial mortgages.
A deal with a smaller interest rate reduces costs over time, acting like a continuous discount on your loan. Even a 1% drop in rates can lead to significant savings, important for the large loans common in commercial property dealings.
At Revolution Finance Brokers, our goal is to secure these advantageous deals for our clients, ensuring their borrowing is as cost-effective as possible.
Reduced mortgage terms
We cut down the time your business spends on a commercial remortgage. This frees you from monthly repayments faster. Short mortgage terms save money by avoiding extra interest charges.
A shorter term for your commercial property loan means better debt management and improved cash flow. We help clients choose the right plan to lessen long-term financial stress.
Flexible interest rate options
Clients often look for ways to cut costs on commercial remortgages. A good strategy is picking the right interest rate option: fixed or variable. Fixed rates keep monthly repayments constant, aiding in budget planning.
Variable rates fluctuate with the market, potentially lowering payments if interest rates drop.
The choice between fixed and variable rates hinges on business operation style and risk tolerance. Fixed rates suit those who prefer predictable payments. Those willing to take risks for possible lower future payments might find variable rates more appealingabel.
How Much Can You Borrow?
We often discuss commercial remortgage borrowing limits. These depend on the loan to value ratio and your company's financial health. The key is the property's market value and what percentage lenders will cover.
Typically, lenders consider up to 75% of a property’s worth for secured loans. With a strong credit score and solid accounts receivable, you might access more. Each case varies though.
We use commercial mortgage calculators to tailor options based on specifics like equity in your property and its energy efficiency rating, which impacts valuation.
By choosing us, you get precise calculations that ensure you find suitable funding options without excess or missing potential opportunities.
When to Consider a Commercial Remortgage
Contemplating a commercial remortgage is an astute choice if you're pursuing reduced interest rates or need to modify your mortgage terms. Your company might have expanded beyond its current capacity, or you might need less due to a shift in favour of more remote work.
These circumstances suggest that altering your mortgage could be advantageous.
Obtaining a commercial remortgage can enhance your fiscal situation for the long run. If your current agreement is nearing its expiry, the time is ripe to explore fresh alternatives.
Keep in mind that early repayment fees may be applicable if you transition too soon. Assessing your loan-to-value ratio is key—it illustrates the equity in your property and can result in improved borrowing limits and terms compared to when you initially secured your mortgage.
Should there have been a rise in property value or betterment in one's credit score since procuring the original mortgage, it would be sensible to consider refinancing choices that align with current requirements.
Why Choose Revolution Finance Brokers?
We make commercial remortgages easy. Our team is skilled in buy to let, business loans, and refinancing options. We aim to find you the best mortgage rates by assessing your business premises, loan to value ratios, and borrowing capacity.
We've successfully helped clients fund office renovations and expand operations. Whether you need a secured loan or flexible financing, we offer clear advice on repayment plans and avoiding early repayment charges.
We always follow Financial Conduct Authority guidelines.
The Application Process
To start your commercial mortgage application, you need to prepare a few essential documents and have your property evaluated.
- Gather key documents.
- Ensure a property valuation is done.
Required documentation
Getting a commercial remortgage needs you to collect several documents:
- Bring your passport or driving license and a recent bill or bank statement for identity and address proof.
- You'll need to show your business's financial statements from the last two to three years.
- Have personal and business bank statements from the past six months ready.
- Include details of your current commercial mortgage: lender's name and account number are key.
- Prepare an asset and liability statement showing what your business owns and owes.
- Your personal credit score matters, so include your credit report as lenders check this too.
- If borrowing a significant amount, lenders may ask for a business plan to see future plans.
- Give information about the property being remortgaged, such as its value and potential rental income.
- If there are tenants in the property, provide copies of their lease agreements.
These documents should be up to date. They play a crucial role in securing a good deal on your commercial remortgage.
Valuation process
To figure out your commercial property's value, we do a property valuation. This checks the building's size, type, and potential income. A professional will visit and use tools like a commercial mortgage calculator to compare it with similar sold properties.
They also examine energy performance certificates to assess if the building is energy-efficient or needs improvements. The property's value determines how much you can borrow on a commercial remortgage.
It affects loan to value (LTV) ratios and monthly repayments.
Common Uses for Funds from Remortgaging
Extra money from a commercial remortgage can help upgrade your office or expand your business.
- We can use the funds to improve commercial premises.
- This cash boost supports business growth.
Office renovation
We help businesses improve their workspaces, often for office renovations. With a commercial remortgage, companies can finance these upgrades by leveraging their property's value. This approach replaces an existing loan and provides additional funds for improvement.
Renovating offices boosts the working environment and increases property value. We've helped clients invest in energy-efficient features and solar panels. These improvements attract eco-conscious tenants willing to pay higher rent.
Expanding business operations
Expanding a business means needing more space and stock, or even new offices. A commercial remortgage can provide the necessary funds for this growth. It offers a chance to secure better terms that fit a growing business's needs.
Clients refinance for various reasons. They purchase new premises or improve their existing ones. Some invest in inventory to satisfy customer demand, while others hire additional staff as their business expands.
With competitive interest rates and flexible repayment options, refinancing is financially wise for many companies aiming to grow.
