Small business commercial mortgage - FAQs
If you are considering applying for a small business commercial mortgage, here are the answers to some frequently asked questions.
What can a small business commercial mortgage be used for?
As the name implies, a commercial mortgage can be used to purchase or refinance just about any type of non-residential property. Commercial mortgages are specialised as the lender has a legal claim over the property until the commercial loan has been paid off in full.
What are the advantages of a small business commercial mortgage?
There are many benefits to buying commercial property using a small business commercial mortgage. The small business commercial mortgage payment is likely to be the same as the cost of renting the property, and you have the added financial bonus that you will eventually own the property. Also, if you rent a property then you are subject to rent increases which can harm your business. The interest payments on a commercial mortgage are tax deductible, which may help you to reduce your overall tax burden each year.
What kind of mortgage do I need if I want to buy a commercial property with a residential property attached?
The FSA rules state that where the residential accommodation accounts for 40% or more of the property, then the latest residential mortgage regulations will apply. A solution could be to create a separate Leasehold Title for the residential property. This will split the property into two: one leasehold residential property and one freehold commercial property. You can then apply for a residential and a small business commercial mortgage for the respective properties.
Is it possible to get a small business commercial mortgage if I have a bad personal credit rating?
Yes, many lenders will take all your circumstances into account and a bad personal credit rating won’t affect your application for a small business commercial mortgage.
Is the process of buying commercial property with a small business commercial mortgage the same as for residential property?
Yes, except for the usually higher sums of money involved in a commercial transaction, the process is essentially the same.
Do I need to produce any additional paperwork when I apply for my small business commercial mortgage?
Some lenders require sight of your previous two years tax returns as well as your proof of income.
If I buy a large building, can I sublet?
As with a residential property, you should consult with your small business commercial mortgage lender before you consider subletting – it could be in contravention of your mortgage conditions.