Yes, commercial properties can be remortgaged. Many businesses and property investors refinance commercial mortgages to secure better terms, release equity or restructure existing borrowing.
Remortgaging a commercial property works in a similar way to residential remortgaging, but commercial lending is usually assessed individually by lenders. This means the property, borrower and income generated by the asset are all considered when reviewing the application.
Why Businesses and Investors Remortgage Commercial Property
There are several reasons why a borrower may choose to remortgage a commercial property.
Common reasons include:
- securing a lower interest rate
- releasing equity from the property
- restructuring existing borrowing
- funding property improvements or business investment
- switching lenders when the original mortgage term ends
For commercial investment properties, remortgaging may also allow investors to release capital to fund additional property purchases.
Releasing Equity From Commercial Property
One of the most common reasons for remortgaging is to release equity from a commercial property.
If the value of the property has increased or the mortgage balance has reduced, borrowers may be able to refinance the loan and access additional funds secured against the property.
This capital can sometimes be used for:
- business expansion
- property refurbishment
- purchasing additional investment property
- refinancing other borrowing
Lenders will normally assess the loan-to-value ratio and the income generated by the property when considering equity release.
How Lenders Assess Commercial Remortgage Applications
When reviewing a commercial remortgage application, lenders usually consider several factors.
These may include:
- the value and type of the property
- the borrower’s financial position
- the income generated by the property or business
- the loan-to-value ratio
- the borrower’s experience managing property or running a business
Because commercial mortgages are assessed on a case-by-case basis, different lenders may offer different terms for the same property.
Understanding how commercial mortgages work can help borrowers see how lenders assess refinancing applications.
Costs of Remortgaging Commercial Property
Borrowers should also consider the costs associated with refinancing a commercial mortgage.
These may include:
- lender arrangement fees
- valuation fees
- legal fees
- potential exit fees from the existing lender
You can learn more about these costs in our guide to what fees are involved in a commercial mortgage.
Why Many Borrowers Use Commercial Mortgage Brokers
Commercial mortgage lenders vary widely in their lending criteria and the types of transactions they are willing to finance.
Commercial mortgage brokers can help borrowers compare lenders and identify those whose criteria match the property and financial circumstances involved in the remortgage.
They can also help structure the application and present the case clearly to lenders.
Understanding what commercial mortgage brokers do can help borrowers navigate the commercial lending market more effectively.
Related guides
- What are current commercial mortgage rates in the UK?
- What fees are involved in a commercial mortgage?
- What do commercial mortgage brokers do?
Need Help Arranging Commercial Property Finance?
Commercial mortgage criteria and refinancing options can vary significantly depending on the property, borrower and lender requirements.
Explore our Best Commercial Mortgage Brokers in the UK guide to compare experienced advisers who specialise in arranging commercial property finance.
