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Mortgages for Pub Businesses
Each business sector is different, and with many clients seeking financing to invest in a pub or bar business, we have created this brief guide to highlight the essential information when mortgaging a commercial pub property.
Understanding How Pub Mortgages Work
Commercial mortgages are a viable option to provide funding to buy a pub.
There are multiple mortgage options, and the right solution depends on whether the pub is freehold or leasehold, and what sort of lending you require.
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How do Lenders Calculate Eligibility for Pub Mortgages?
Investing in a pub isn't the same as mortgaging a residential property, since it is a business rather than primarily a home.
Mortgage lenders will want to know about your skills, experience and business plan to demonstrate that the investment is viable.
Typical factors a commercial lender will look at include:
- The LTV ratio - i.e. how much you want to borrow against the value of the property.
- Your credit history and rating.
- Whether you have previous experience in the pub industry.
- Business profits and performance to demonstrate affordability.
- Where the business is based.
Do I Need a Minimum Number of Years Experience to Mortgage a Pub?
While not essential when working with an expert broker, a mainstream lender prefers to see applications with at least two or three years of experience.
Our specialist lenders will also consider start-ups and new businesses.
In some cases, you might not have owned a pub before, but have other relevant experience such as in other areas of hospitality, or in managing a business or workforce.
How Much Deposit Do I Need to Buy a Pub Through a Mortgage?
Commercial mortgages tend to start at around a 30% deposit, with some lenders requiring as much as 45%.
This all depends on how risky the application is, and you can influence the deposit requirements by considering:
- Whether you can offer additional security as well as a deposit.
- If you need an owner-occupier mortgage, with a deposit requirement of 30-40%.
- If you need a commercial investment mortgage, with deposits around 30%.
Is There a Maximum Mortgage Size for a Pub Business?
Commercial mortgages don't have a fixed maximum, per se, but a lender will look at the business trade and profits to calculate the maximum they feel comfortable lending.
In some cases, you might be able to include other income to add to the trading profits to increase the value you can borrow.
Lenders may also consider projected trade and earnings.
Is it Best to Use a Specialist Lender or a High Street Bank for a Pub Mortgage?
In many cases, commercial mortgages are more competitive with lenders who have experience in the sector and understand the market and trading conditions.
For professional advice about the lenders best suited to your borrowing requirements, give us a call on 0330 304 3040.
Can I Mortgage a Pub if I Have Adverse Credit Issues?
Mainstream lenders often reject commercial mortgage applications where there are negative credit issues to consider.
However, niche lenders can be more flexible and will consider how severe the credit issues were, and when they occurred.
Remember that shareholders and directors are also liable to be credit-checked, and any bad credit ratings of an owner may impact the lenders you can apply to for your pub mortgage.
Is it Possible to Apply for a Pub Mortgage After Retirement?
You can - if you meet the other eligibility criteria, then niche lenders will be happy to lend to you, regardless of your age.
Does the Size of Pub Mortgage Impact the Eligibility Rules?
Not really, since commercial mortgages are bespoke and the size of the mortgage will depend on the property, business, and circumstances.
Is it Worth Using a Pub Mortgage Calculator?
Mortgage calculators are useful as an indication, but cannot help with understanding the exact rates you are likely to be offered, as this all depends on a wide range of eligibility criteria.
The only way to get an accurate idea of the interest rates, maximum borrowing, and monthly repayment values is to speak to a professional commercial mortgage broker, such as the Revolution Finance team.
Are There Alternatives to Commercial Mortgage Finance for a Pub?
There are multiple commercial financing options, depending on how much you need to borrow and for what purpose:
- Releasing equity - if you have other properties, you can remortgage to release capital for a pub investment.
- Bridging loans - a short-term alternative financing option if you need pub finance quickly, or are pending other sales before applying for a mortgage.
- Development finance - ideal for new-build business projects, or redevelopments. If you want to renovate an old pub business, you can usually borrow up to 75% of the initial cost, and 100% of the build costs. The finances are released in stages as the build progresses.
Expert Advice with UK Pub Mortgages
Whether you want to invest in a pub business, renovate an existing property, or remortgage your commercial financing, the Revolution Brokers team can help.
As an independent UK whole-of-market broker, our consultants offer professional advice on the right financing products, and the best mortgage options to support your business goals.
Give us a call on 0330 304 3040 or get in touch via email at [email protected].
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As specialist mortgage brokers for a huge variety of applicants, the whole-of-market consultants at Revolution provide access to an exceptional range of lenders, products and mortgage deals. That means you get the advantage of professional negotiation and broker-exclusives through an established lending network to ensure we always find you the most competitive mortgage available.
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.