The world of commercial mortgages can be complex and confusing, so we recommend that you seek expert advice prior to jumping in. If you’re considering using a commercial mortgage broker to help with your commercial mortgage needs, you probably have a lot of questions. Below we answer the most commonly asked questions about commercial mortgage advisers, including whether they are regulated, what qualifications they have, what they do, how they get paid, and how to find the best one to suit your needs.
Whether you’re a seasoned commercial property investor or new to the game, this post will provide valuable information to help you make an informed decision about whether using a commercial mortgage advisor is right for you.
Please note, this article focuses only on commercial mortgage advisers. If you’re interested in finding out more about residential mortgage advisers in the UK, we’ve covered your questions separately here:
These are the most common questions asked by customers looking for a commercial mortgage adviser:
- Can you mortgage a commercial property?
- How much can I borrow on a commercial mortgage?
- What are commercial mortgage lenders?
- What is a commercial mortgage broker?
- Are commercial mortgages regulated?
- What qualifications do commercial mortgage brokers have?
- What do commercial mortgage brokers do?
- How much do commercial mortgage brokers charge?
- What are the requirements of a commercial mortgage broker?
- What are typical commercial mortgage rates?
- How do I find the right commercial mortgage broker?
- How do I find a commercial mortgage broker near me?
Can you mortgage a commercial property?
Yes, just like a residential property, you can secure a mortgage against a commercial property such as:
- a bed and breakfast (B&B)
- a care home
- a coffee shop or café
- a dental practice
- a GP surgery
- a gym
- a hotel
- an industrial unit
- an office building
- a pub
- a restaurant
- a vet’s practice
This list is not exhaustive. There are many kinds of commercial property you can use a commercial mortgage to buy or remortgage.
Commercial mortgages can also be secured against mixed-use properties, e.g. a building or development with a commercial space, including gyms, shops, restaurants or offices, and residential living units, e.g. apartments or houses.
Commercial mortgages can be for:
- owner-occupiers – such as a business wanting to buy an office for its own use
- commercial buy-to-let (BTL) investors – buying a commercial property to rent to another business
- residential buy-to-let (BTL) investors – where a company buys a residential property or holiday home to let out
Limited companies, sole traders, LLPs and partnerships can all apply for commercial mortgages. Lenders will consider commercial mortgages for small businesses as well as medium and large businesses.
There is no limit to how many commercial mortgages you can have as long as they are affordable, justifiable and you meet the individual commercial mortgage lender’s requirements. It’s not uncommon for a business to have multiple commercial mortgages on different properties.
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How much can I borrow on a commercial mortgage?
Calculating how much you can borrow with a commercial mortgage is unfortunately not as simple as it might be for a residential mortgage. Affordability is assessed on a case-by-case basis by each commercial mortgage lender, using its own unique methodology.
The figure most lenders are interested in is your business’ earnings before interest, taxes, depreciation, and amortization (EBITDA). This is considered the most useful measure of a company’s overall financial performance for commercial mortgage lending purposes.
Your trading history, credit score and the size of your deposit will also be factored in to the lender’s calculations.
There are many commercial mortgage calculators available online (usually not on the websites of commercial mortgage lenders) but these provide only a very rough guide and you should make no financial decisions based on this information.
What we can tell you, is that commercial mortgage lenders generally offer commercial mortgages up to max 80% loan-to-value (LTV) for owner-occupied properties and 75% LTV for commercial BTL properties. This means you would normally need a deposit of at least 20-25%, depending on the lender and their attitude to risk. Obviously the larger your deposit, the lower the loan-to-value (LTV) and therefore the better the rate you’ll be offered.
For commercial mortgages for new businesses, e.g. where a property (possibly a shop or warehouse) is required to start the business, a much larger deposit of around 50% of the purchase price would usually be required to satisfy the lender. As a new business has no trading history, it’s a higher risk to the lender.
Some commercial mortgage lenders may be able to consider higher LTV commercial mortgages as detailed in the next section.
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What are commercial mortgage lenders?
Commercial mortgages are provided by three main types of lenders, high-street banks, challenger banks and specialist commercial mortgage lenders.
High-street banks often have the strictest criteria, but will reward you with the most competitive interest rates. Challenger banks have more flexible criteria, but slightly higher rates. Specialist commercial mortgage lenders offer the most flexible criteria, some even accepting customers with adverse credit, but the additional risk is offset with higher interest rates.
Although commercial mortgages are traditionally more expensive than residential mortgages due to the increased complexity and risk, commercial mortgage lenders can sometimes be more flexible than residential lenders. One way in which they may be able to do this is by considering lending up to 100% of the commercial property value if you’re able to provide some extra collateral that they can put a charge over, e.g. other properties or assets.
Before you approach a commercial lender, it’s well worth taking the time to speak to a commercial mortgage broker, who’ll be able to talk you through all the complexities of commercial mortgages and recommend the best commercial mortgage lender to suit your needs and circumstances.
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What is a commercial mortgage broker?
Commercial mortgage brokers, also referred to as commercial mortgage advisers or commercial mortgage advisors, act as an intermediary between individuals or businesses that need a commercial mortgage and commercial mortgage lenders. They are experts in their field and have a vast network of contacts within the lenders, which will help them find you the best deal to suit your circumstances and requirements.
A commercial mortgage broker may also be able to advise you on asset finance (borrowing to purchase an asset or using an existing asset as security for a loan), development finance (short-term lending for property development or construction projects), invoice finance (improving a company’s short-term liquidity by borrowing against outstanding invoices) or bridging loans.
The terms of commercial mortgages tend to be more tailored to the individual or company’s needs and circumstances than residential mortgages are. Some commercial mortgage lenders specialise in specific types of commercial property only, making it a complex and time consuming process to find the right lender without having experience in the industry. For this reason, it is a common belief that commercial mortgages are harder to get than residential mortgages. This is not necessarily the case. A knowledgeable and experienced specialist commercial mortgage adviser can simplify the process and using one can result in substantial savings in terms of time and money.
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Are commercial mortgages regulated?
In contrast to residential mortgages, which are regulated by the Financial Conduct Authority (FCA), most UK commercial mortgages are not regulated. The only exception to this is if 40% or more of the property is used as the borrowers main residence, for example a flat above a shop, in which case it is regulated by the FCA.
For commercial mortgage brokers to advise individuals (sole-traders) and small partnerships of less than four people, they must register with the FCA.
Most commercial mortgage lenders also require commercial mortgage advisors to be a member of the National Association of Commercial Finance Brokers (NACFB) before they can advise customers on their products and submit commercial mortgage applications on their behalf.
The NACFB’s Code of Practice ensures that its members treat their customers fairly and honestly. It states that members “must exercise and be able to demonstrate appropriate levels of skill, knowledge and diligence in their dealings with Clients, lenders and third parties” and “must put the fair treatment of Clients at the centre of their business activities. In arranging deals and giving advice, a firm must be able to demonstrate that their recommendations are suitable and appropriate to their Clients’ requirements.”
Before choosing a commercial mortgage broker, we would therefore recommend that you check whether they are a member of the NACFB. You can find this information easily on our commercial mortgage broker listings.
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What qualifications do commercial mortgage brokers have?
For commercial mortgage brokers to advise on regulated mortgages (where 40% or more of the property is used as the borrowers main residence), just like residential mortgage advisers, they are required to have a Level 3 mortgage advice qualification recognised by the Financial Conduct Authority (FCA).
The two most common qualifications are:
- Certificate in Mortgage Advice and Practice (CeMAP) – London Institute of Banking and Finance
- Certificate in Mortgage Advice – Chartered Institute of Insurance
The above qualifications are specifically for advising on residential mortgages however. As mentioned above, commercial mortgages are much more complex than residential mortgages, so most commercial mortgage advisers, even though it is not a requirement to do so, will opt to study additional relevant qualifications, including:
- Certificate in Business Banking (CertBB)
- Certificate in Business Banking and Conduct (CertBB&C)
- Diploma in Business and Commercial Banking & Conduct (DipBB&C)
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What do commercial mortgage brokers do?
Commercial mortgages are complex, but your commercial mortgage broker will be able to guide you through the process and make it as simple as possible, saving you valuable time and money. They will be able to:
- understand what you’re looking to achieve by taking out a commercial mortgage
- explain to you what types of commercial mortgages are available and what the process is for obtaining one
- access commercial mortgage deals that may not be available to you if you tried to go direct to a commercial mortgage lender
- recommend the best commercial mortgage product and lender for you based on your needs and circumstances
- complete and package your commercial mortgage application
- liaise with the commercial mortgage lender until your mortgage is offered and completes
Some commercial mortgage advisors may specialise in the following:
- 100% LTV Commercial Mortgages
- Asset Finance
- Commercial Development Mortgages
- Commercial Mortgages for Bad Credit
- Commercial Mortgages for Care Homes
- Commercial Mortgages for Dental Practices
- Commercial Mortgages for Guest Houses
- Commercial Mortgages for GP Surgeries
- Commercial Mortgages for Hotels
- Commercial Mortgages for Industrial Units
- Commercial Mortgages for Office Buildings
- Commercial Mortgages for Vet Practices
- Commercial Pub Mortgages
- Equestrian Finance
- Invoice Finance
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How much do commercial mortgage brokers charge?
Commercial mortgage brokers typically charge a fee of around 1% of the mortgage amount. When you are required to pay this depends on the broker, but it could be up-front or when your mortgage is formally offered by the lender.
As well as your commercial mortgage broker’s fee, other fees you need to look out for when taking out a commercial mortgage include:
- Lender Arrangement Fee – around 0.75-2.5% of the loan amount (can often be added to the loan so you don’t need to pay it up front)
- Lender Commitment Fee – some lenders will ask for part of the arrangement fee, typically 0.25-1%, when accepting the formal mortgage offer
- Valuation Fee – valuations start at around £500 but can range depending on the value of the property and are normally payable once the application has been agreed subject to valuation. Commercial valuation fees are usually more expensive than residential property valuations
- Legal Fees – again, these can vary depending on the value of the commercial property, but start at around £1,000. It’s best to obtain three quotes before making a final decision on a solicitor.
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What are the requirements of a commercial mortgage broker?
Every commercial mortgage lender is different, so their requirements will vary. Your commercial mortgage adviser will ask you to provide the essential information and documentation to be able to assess your needs and circumstances accurately. To save time and ensure your application is progressed smoothly, it’s best to collate these documents prior to your first meeting with a commercial mortgage broker. Obviously they may still need to request further information and documentation later, depending on the individual lender’s requirements.
Your commercial mortgage broker and lender will likely ask you for the following documents as a minimum:
- company/business details
- details of the person applying for the mortgage on behalf of the company, e.g. full name, date of birth, three years’ address history and contact details
- proof of ID and address for the person applying for the mortgage
- two to three years’ full financial accounts
- management accounts if available
- an assets and liabilities statement
- a business plan or financial projection
- latest three months’ business bank statements
- property details – if you haven’t found a property yet, maybe an idea of the kind of property you’re looking to buy. This should include the estimated value, construction type, age, whether it’s freehold or leasehold, etc.
- details of the tenant, lease terms and likely rental income if the property is to be rented
- proof of deposit, e.g. bank statements
Most commercial mortgage lenders will also carry out business and personal credit searches. If you do have a history of imperfect credit, it’s wise to to be upfront and honest with your broker about this so they can assess whether you are likely to be able to approach a mainstream lender or whether a specialist lender would be more suitable. Some lenders do specialise in commercial mortgages for bad credit.
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What are typical commercial mortgage rates?
Unlike with residential mortgages, it’s difficult to compare commercial mortgage rates in advance of applying, because each lender tends to offer a bespoke rate depending on your circumstances. Most lenders will offer fixed and variable rate commercial mortgages, on a capital repayment or interest-only basis.
Commercial mortgage terms offered by the majority of lenders are 5-25 years, however you may be able to find a specialist commercial mortgage lender that will consider a longer term up to 30 years.
Commercial mortgage rates are generally more expensive than residential mortgage rates, but on the plus side they are cheaper than business loans and the interest may be tax deductible. At the time of writing, commercial mortgage advisers listed in our directory were quoting commercial mortgage interest rates of between 2.35% and 6%, but, with interest rates on the rise and lenders offering bespoke rates on commercial mortgages, they could be much higher when you apply.
For the best rates, it is advisable to speak to a commercial mortgage broker who can shop around for you, matching you with the best lender for your needs and circumstances.
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How do I find the right commercial mortgage broker?
We’ve already covered many of the reasons why you should use a commercial mortgage broker. Now it’s time to browse our Commercial Mortgage Broker Directory to find the best broker for your needs.
Our directory includes real customer reviews and ratings. The commercial mortgage advisers with the best ratings appear first.
You can filter brokers by:
- their advice methods, e.g. face-to-face, online or telephone
- their specialisms
- the languages they speak
- whether they’re open now
Finding the right one for your needs is down to your personal preferences, but you should consider the following:
- Would you prefer to meet your commercial mortgage broker face-to-face or deal with them over the phone or online?
- If you’d prefer to meet them face-to-face, how far are you willing to travel?
- Do you have any specialist needs?
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How do I find a commercial mortgage broker near me?
The easiest way to find the best commercial mortgage brokers near you is by using our directory – Commercial Mortgage Brokers Near Me
Click the “Near Me” filter to show the closest commercial mortgage advisers first.
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