We will guide you through the commercial mortgage application process…
Whether you are a company purchasing new commercial premises, or an investor buying a rental property to let to commercial tenants, our team of experienced commercial mortgage specialists will help you apply for, and secure, the ideal commercial mortgage.
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At Commercial Trust, we are here to help you succeed.
Our dedicated team of commercial mortgage advisors will guide you through each step of the application process, from helping you find a great deal, all the way through to completion. They will carry out a detailed level of research to find a mortgage that best suit your needs and circumstances.
Wherever possible, our account management team will then carry out any administrative tasks associated with completing the mortgage for you.
Your account manager will also provide you with regular updates on the progression of your application, and work to ensure that the mortgage completes within the most efficient time-frame possible...
1. Adviser consultation:
The broker will want to find out about the investor and the deal, including details of the premises and, if the property is to be occupied by the investor’s own company, details of that business.
An investor should tell the broker what they want the product they are looking for to do for them. There may be multiple requirements.
This process of gathering information from a client is called the ‘factfind’.
2. Sourcing the deal:
This is where the advisor searches the marketplace to find a product which matches the information gathered during the factfind.
There are two areas of focus when sourcing a deal. The first is which lender(s) the deal ‘fits’ with, based on criteria. The second is, of the lenders the deal fits with, which one offers the most competitive interest rate.
There are many factors that can result in a deal falling inside or outside lender criteria, which is why it is essential to give accurate information during the factfind.
What makes commercial mortgage rates different to residential or buy to let, is that the difference between one lender’s rates and another can vary far more significantly. Commercial mortgage lender fees are also generally very similar.
This means that, the rate of repayment is a key factor on a commercial mortgage deal, where on other mortgage products, the overall cost will be very important.
3. Asset and liability form:
An Asset and Liability form requires details of all income and expenditure for the mortgage applicant(s) and, if investing through a limited company, for the business too.
4. Decision in principle:
(also known as an agreement in principle) is a pre-application, non-binding offer by a mortgage lender, to loan an amount of money.
Some lenders may undertake a “soft” credit search on the applicant at this stage. This search that will not appear on a credit report to any third parties, or affect the applicants credit rating, but will be visible to the applicant if they were to secure their own credit report.
Once a decision in principle has been secured from the appropriate lender, a broker will contact the client to outline the deal.
At this point, the client will tell the broker whether to proceed with a full application.
It is standard procedure for all mortgage applications to include a credit check. At this stage this will be a “hard” search, visible to third parties and that may affect the applicant’s credit score.
6. Request for documents and information:
At this point each lender will have a pack of information they require from the applicant(s). This list of documents varies from lender to lender.
It is easy to provide incorrect documents, or complete forms incorrectly, which can cause delays.
Where a service-led broker is involved, a commercial mortgage applicant should expect the support team working with them to supply the list of lender requirements. The mortgage broker team should check that the documents are the correct ones and that they are completed correctly.
If the documents were to be sent direct to the lender, the risk is that the lender’s turnaround time would hold up any discovery of there being any problems, so this intermediary function can be very useful.
Commercial lenders may instruct the valuation before or after all documentation is received, if it is dependent on the documentation being received, then getting this done quickly will avoid delays to the ongoing process.
8. File review:
The lender will review all documentation and the valuation as a whole. Further requirements for information may arise that need to be provided by the applicant(s).
9. Mortgage offer:
Once all residual requests for information have been satisfied, the lender will issue the commercial mortgage offer. This will be provided to the client and (if applicable) the broker. Some lenders will issue this by post, some by email. Sometimes the broker will receive the offer first, because it will go by email to the broker but by post to the client.
10. Solicitors are instructed:
The mortgage lender will instruct their solicitor to start work at this point. They will, in turn, contact the client’s solicitor.
Enquiries and searches (if the application is a remortgage) are undertaken by the solicitors.
The work of solicitors is vital to the timely progression of the mortgage application. Anyone looking to secure a commercial mortgage should ensure that the solicitor they appoint is experienced in commercial property conveyancing.
If not, it is easy for mistakes and misunderstandings to occur, as a result of the solicitor being on unfamiliar territory. This can cause delays and unnecessary problems.
11. Mortgage contract issued:
The mortgage lender will issue the mortgage contract to the client’s solicitor, who will check it, before the client signs it.
12. Funds released:
After final checks are completed and everything and everyone is ready to do so, the lender’s solicitors will request fund from the lender.
When the lender releases the funds they are paid into the lender’s solicitor’s bank account, then the client’s solicitor’s bank account and lastly into the seller’s solicitors bank account.
The case is now completed. Where a broker is involved, the client should expect the broker to confirm this, they may also receive notification from their lender.