Business Loan to Buy Property
Also referred to as a commercial mortgage, these loans represent the subsequent step after a basic business loan if you seek financing for a business property. Business loans, particularly those up to £350,000.00, typically remain unsecured. However, for larger sums, lenders aim to mitigate risks associated with a business loan for property acquisition.
Business Loan to Buy Property
What is a business loan to buy property?
In the case of a business mortgage of this nature, the duration typically spans from 3 to 25 years, usually with a mortgage covering 70-75% of the property value. For investments, the borrowing amount is contingent on the rental income, capped at a maximum of 65% of the purchase price.
Investment mortgages are designed for properties intended for letting out, while owner-occupier mortgages are tailored for purchasing properties for business trading premises.
When is a business loan to buy property used?
Business mortgages differ significantly from standard mortgages in that fixed rates are seldom offered for business mortgages.
Furthermore, commercial mortgages typically provide more favourable interest rates compared to regular business loans due to the inclusion of property collateral.
However, it’s essential to note that when acquiring a property through a business loan, the interest payments on commercial mortgages are generally higher than those on regular home mortgages. This is because lenders consider them to be higher-risk transactions.
The benefits of a business loan to buy property:
Initially, you may not have been aware, but the interest on your business mortgage is tax-deductible.
The rationale behind individuals opting for business loans to purchase property is the prospect of renting out the property once everything is arranged, thereby creating an additional source of income.
Lastly, if the property you have acquired appreciates in value, the capital you have invested could potentially experience an increase.
The process is quite akin to applying for a standard mortgage, but engaging a specialist broker might be advisable. They can assist you in identifying the most suitable lender for your situation and guide you through the application process.
1. Fill in and submit the Asset and Liability form, typically available for online completion.
2. Complete the application form for your commercial mortgage.
3. Furnish the following details about your business:
– Bank statement covering the last three months
– Trading figures spanning the last three years
– Proof of your identity and current address
– Lease and/or tenancy agreements
– Possibly a business plan outlining your financial projections
4. The property you’re seeking a business loan for will then undergo valuation.
5. The lender’s solicitors will conduct necessary due diligence.
6. If your application is approved at this stage, you will receive a mortgage offer from the bank.