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Commercial Remortgages

If you're looking for extra working capital, either to expand, pay off existing debts or take advantage of new opportunities, you might be considering a commercial remortgage. As with all financial decisions, you should weigh up all the pros and cons before taking the plunge. A professional financial adviser will talk to you about your options.

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What is commercial remortgage?

Commercial remortgaging, or refinancing, is simply replacing your existing mortgage with a new one, much like remortgaging a residential mortgage. You will use the property as security.

The following topics are covered below:

Why remortgage my commercial property?

Pros and cons of commercial remortgage

How do I remortgage my commercial property?

Credit history

Industry experience

Why remortgage my commercial property?

Commercial property owners choose to refinance for a number of reasons.

 - to release equity that has built up during the course of your mortgage term. The equity can be used to pay off existing debts or invest in a new property

 - if the property has increased in value, to borrow against its new valuation

 - to access a better deal with another provider. As commercial property deal terms may have changed since you took out the original mortgage, chances are you'd be better off refinancing for more favourable rates

 - to change from owner-occupier to commercial landlord, perhaps if you want to keep the existing property and purchase another one

Pros and cons of commercial remortgage

Commercial remortgage is a great way to access working capital by switching to a lower interest rate and reduce your monthly payments. The extra cash could be used to finance a new business deal or acquisition, refurbish or renovate an existing property, buy new equipment, pay off debts or invest in new equipment or hiring more staff.

However, your current provider may charge an exit fee for early repayment of your existing mortgage. There may also be arrangement or booking fees, while a new deal could also result in a longer repayment period . Your financial adviser will help you calculate the risks so you can make your decision.

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How do I remortgage my commercial property?

Commercial mortgages are often offered at a lower rate than other types of loan. The loan is secured against your property to give you the flexibility to invest the equity released however you see fit.

To qualify for a commercial remortgage, the lender will need to assess your eligibility based on a number on a number of factors.

If you have built up a good deal of equity in your existing property, the lender will see this a lower risk as you will have a lower loan-to-value (LTV). You will not need a deposit as the LTV rate will suffice. Lenders will typically like to see an LTV rate of a minimum of 75%, although some lenders will not go higher than 60%. The lower the LTV, the higher your chances are of being accepted for a commercial remortgage.

Credit history

Although most lenders would prefer to see a clean credit history, you could be refused if they see you as too much of a risk. However, there are some that can help investors with issues that have arisen. This could result in higher interest rates, so this is something to take into consideration before you make your application.

There are ways to combat any credit issues, such as offering more security on the loan, or a personal guarantee.

Industry experience

A stronger track record in your line of business will land you a higher chance of being accepted by a lender. It can depend on the type of industry, as some are deemed risker than others. It's important to speak to an experienced advisor to find the best deal.

Revolution Brokers are whole of market specialists, offering a bespoke service to suit your needs.

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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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