While most business owners will be familiar with residential mortgages, applying for commercial lending is somewhat different - and the deposit requirement is also variable.
The Revolution Brokers team has created this guide to help businesses understand how commercial mortgage deposits work, and how to calculate what sort of down payment you might be asked for!
For more specific advice and guidance about finding the best commercial mortgage rates to match your deposit level, get in touch on 0330 304 3040 or email us at info@revolutionbrokers.co.uk.
What Deposit Do I Need for a Commercial Mortgage?
The level of deposit depends on what sort of mortgage you're applying for. Mortgages for businesses fall into these categories:
- Owner-occupied mortgages - if you want to buy a commercial building to work from.
- Investment mortgages - for buy to let commercial premises.
Deposits required will vary depending on which category you fall into.
What are the Deposit Requirements for Different Types of Commercial Mortgages?
Generally speaking, a commercial mortgage lender will look for deposits from 25% and up to 40%. This all depends on the risk level, although typically deposits are higher for business mortgages than residential.
Most mortgage lenders will offer:
- Owner-occupied mortgages up to 70-80% LTV.
- Commercial investment mortgages up to 75%.
In some cases, you can borrow more, and even up to 100% LTV, although this is a more specialist product and security will be required.
What Factors Around my Commercial Mortgage Impact the Deposit Required?
Every lender will consider the risk factor before making an offer.
Risk is assessed according to your specific circumstances, including factors such as:
- Your credit score and credit history. If you have bad credit, a higher deposit will be required. In many cases, the best option is to apply to a specialist bad credit commercial lender.
- Your experience and trading history. The longer you have been trading, the lower the risk, so having two or three years of experience is positive. There are niche lenders who specialise in start-ups and new businesses, but will usually require additional security where the deposit value isn't high.
- Your affordability assessment. Lenders will look at the business profits, tax obligations and earnings to determine whether the company is sufficiently profitable to generate the funds required to keep up to date with the mortgage repayments.
Can I Get a Commercial Mortgage with a Small Deposit?
Yes, by working with an experienced lender, you can negotiate Loan to Value caps with a lender if your deposit isn't high enough to meet their lending criteria.
In most cases, this means they will require an alternative form of security - usually another building, or a business asset with sufficient equity.
Are Commercial Mortgages Available with Zero Deposit?
100% LTV commercial mortgages do exist, but this is a specialist product, so you are strongly advised to consult a professional brokerage team.
You will need some form of security with enough equity to act in place of a deposit.
Remember that any security offered is at risk of repossession if you do not keep up to date with your repayments.
Expert Commercial Mortgage Advice
If you have a low deposit, are seeking a high LTV commercial mortgage, or want to compare the different lending rates and terms on the market, contact the Revolution Finance team today.
Our independent whole-of-market team is available on 0330 304 3040 or via email at info@revolutionbrokers.co.uk.
