Commercial Investment Mortgages

In this brief guide, you will find a summary of the most important information on investment mortgages, including their intended applications and how to apply.

What is a Commercial Investment Mortgage?

A commercial investment mortgage is essentially the commercial equivalent of a buy-to-let mortgage. Investment mortgages are issued to those who intend to purchase commercial or semi-commercial properties, for the purposes of letting them out.

Commercial investment mortgages can be used to purchase various types of properties, including but not limited to offices, shops, industrial units and buy-to-let residential properties.

How Does an Investment Mortgage Differ from a Conventional Mortgage?

The biggest difference with a commercial mortgage is the way in which the lender is interested in the income the property being purchased will generate. If the projected monthly rental income on the commercial property will cover the costs of the loan, the mortgage will usually be granted.

With conventional residential mortgages, eligibility is assessed based on the applicant’s personal earning capacity and financial status.

Commercial lenders are less interested in the financial position, track-record, and current income of the applicant. Instead, they review the market potential of the property i.e. demand for the specific type of property, its location, quality of the tenant and the likelihood of the property being let out long-term.

How Many Investment Mortgages Can I Take Out?

There are technically no limitations as to how many investment mortgages you can have. With a commercial investment mortgage, each application is considered according to the likelihood of the proposed project generating enough money to cover the costs of the loan. If the lender is confident that the property will generate a suitable return for the life of the loan, the mortgage should be granted irrespective of how many other loans the applicant is currently repaying.

How Should I Apply for a Commercial Investment Mortgage?

The key to a successful commercial investment mortgage application lies in carefully considering your requirements and the available options at the earliest possible stage. This is where the support and representation of an experienced broker can help.

All lenders impose their own restrictions and requirements on investment mortgage applications, so it pays to know who to target. In addition, you may find that an imperfect credit score and/or a history of bankruptcy or insolvency on your track-record could impact your eligibility.

Whether you are ready to go ahead or simply considering a commercial property investment, we are standing by with the support you need to make the right decision. Call anytime to book your obligation-free consultation with a member of the team.

Application Process and Qualification Criteria

Understanding how the application process works holds the key to accessing a competitive commercial mortgage deal. Qualification criteria vary significantly from one lender to the next.

The Commercial Mortgage Application Process

Here is a brief overview of the various stages of the commercial mortgage application process:

• Consult with an independent broker to access the honest and impartial advice needed to choose the best way forward. Always seek independent advice before approaching any commercial mortgage lender directly.
• Your eligibility will be established through a frank and open discussion with your broker, along with your requirements and the likelihood of your application being accepted by any given lender.
• Following a whole-market comparison performed by your broker, your initial application will be submitted to a selection of hand-picked lenders that suit your requirements.
• You can then choose from the best offers, by considering the competitiveness and flexibility of the loan. Even at this stage, you will be under no obligation to go ahead.
• If you choose to go ahead, your broker will help you complete the formal application process and ensure all supporting documentation is provided, according to the lender’s requirements.
• If the lender is happy with your application, they may respond with a formal offer, which will include a full disclosure of all costs and repayment obligations. It is also possible that they may wish to speak or meet with you directly, in which case your broker will make the necessary arrangements on your behalf.
• After receiving the lender’s formal offer, you will have the option of signing the contract to continue the deal or walking away if you are not completely satisfied.
• When the lender receives your signed contract and is happy with all supporting documentation/evidence provided, the loan can be agreed, and the funds will be released.

It is important to note that at various stages throughout the process, it may be necessary to involve outside parties to produce the supporting documentation you need. Examples of which include surveyors to conduct a formal valuation of the property you intend to purchase, along with legal representatives who may also be involved in the process.

Arrange an obligation-free initial consultation with an independent broker at an early stage to discuss the specifics of the application process in more detail.

Essential Commercial Mortgage Considerations

Prior to applying, it is important to be aware of several additional factors and considerations that apply to commercial mortgages:

• Most commercial mortgages take longer to apply for and access than their conventional residential counterparts.
• Underwriting processes for commercial mortgages are predominantly manual, which can lead to delays along the way.
• Commercial mortgage underwriters can be comparatively flexible, considering all cases on their individual merit.
• Commercial mortgages are issued primarily based on the value and eligibility of the security, rather than credit histories and personal financial position.
• An experienced broker can simplify all aspects of the application process, while also helping you access an unbeatable deal.