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Remortgaging Commercial Property

Remortgaging Commercial Property

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Commercial lending is a crucial cost for businesses, and the Revolution team regularly deals with enquiries looking at remortgaging rates, and considering financing options for companies that want to minimise their interest costs.

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

The Revolution finance team is an independent, whole-of-market broker on hand to offer professional support. Call us on 0330 304 3040 or email on info@revolutionbrokers.co.uk.

How Can I Remortgage a Commercial Building?

There are plenty of options to refinance a business property, and the process itself works similarly to remortgaging a residential home.

In essence, you are switching from one mortgage lender to another, with the same property as security against the lending. Remortgaging is an excellent option for changing to a lender with a more competitive deal, or renegotiating 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.

What are the Benefits to Remortgaging Commercial Properties?

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 I Borrow Through Refinancing a Commercial Mortgage?

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 Mortgage Rates are Payable on Commercial Property Refinancing?

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 full repayments according to the commercial 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.

What is the Difference Between Business Refinancing and Commercial Remortgaging?

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 a 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 Refinance my Business Debts?

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

If you wish to consolidate or refinance business debts, 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 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 higher loan values can be secured through a broker.

How Do I Refinance an Unsecured Company Loan?

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 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.

What are the Benefits to Refinancing Unsecured Business Loans?

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 bad credit 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 Remortgage a Commercial Property?

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?

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

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.

Get in touch today to discover the most efficient options for business refinancing, on 0330 304 3040 or via email at info@revolutionbrokers.co.uk.

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FCA disclaimer

*Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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