This information should not be interpreted as financial, tax or legal advice. Mortgage and loan rates are subject to change.
Remortgaging a commercial property can be a complex process. It involves taking out a new mortgage to replace an existing one, typically to secure a better deal or to release equity.
In this guide, we will explain the steps involved in getting a new commercial mortgage deal, whether you are borrowing the same amount, changing the borrowing terms, or raising capital. We will also provide helpful tips to make the process as smooth as possible.
- Can you remortgage commercial property?
- What does it mean to remortgage a commercial property?
- Is a commercial remortgage different from a residential remortgage?
- Should I remortgage my commercial property?
- What are the pros and cons when you remortgage commercial property?
- Can I borrow more, when remortgaging commercial property?
- Can I remortgage from owner-occupation to investment only borrowing?
- Where can I find current commercial mortgage rates?
- How a commercial broker can help
Yes, you can remortgage commercial property. What’s more, it is sensible to investigate doing this, when you get to the end of the initial rate period of your current deal.
This is because:
- The lender’s reversion rate (the interest rate your monthly payments would be based on, if you did not arrange a new deal) is likely to be higher than the rate you were paying, and higher than another new deal (with either your existing lender, or a new one).
- You might be able to get a lower mortgage interest rate and cheaper monthly costs.
- You may want to change the terms of your mortgage to fit in with any changes in your circumstances.
When you remortgage a commercial property, you take out a new mortgage to replace an existing one. This is usually because:
- You have reached the end of an existing mortgage term;
- You want to take advantage of better interest rates;
- You want to raise money by releasing equity from the property;
- Your circumstances have changed.
It is important to understand the costs involved in remortgaging, such as legal fees, valuation fees, and any early repayment charges on the existing mortgage.
However, it is also vital to ensure you secure the best deal possible when secure your next commercial mortgage. This is so that you pay as little as possible for borrowing the money need.
A specialist broker will have a depth of knowledge and the tools available to them to go through this process quickly and easily for you. They can also support you right the way through from finding you a deal, to completing it.
Yes it is. Whilst broadly speaking, remortgaging a property has similarities in terms of the process you will go through, the difference lies in the property type and therefore the mortgage type you can use.
You cannot use a high street residential mortgage on a property that a business (or businesses) operate from. This is because the risks associated with each property are different. Where the risks are different, the rules of the remortgage have to be different. This affects the fees and charges associated with the remortgage too.
The process of finding a deal from a lender, an application being submitted, a valuation bring conducted, a mortgage offer being provided and the legal work being done are the similar steps in the process between a residential remortgage and when you remortgage commercial property.
At Commercial Trust our advisors are here to make the whole process easy, seamless and stress-free, whilst also getting you the best possible deal to keep costs to a minimum. Why not live chat with one of our experts, call us on the number at the top of the page or request an advisor call-back.
Weighing up whether or not you should remortgage your commercial property comes down to assessing what will happen if you do not.
There will either be an opportunity pushing you to make a change, e.g. better rates becoming available; an improvement in your credit score, which could mean lower interest rate deals are available to you. An increase in the value of your property value could get you a lower loan to value. You want to use equity in your property to spend on something important.
Or there will be a problem pulling you into having to remortgage. The most common being that your initial rate period (the special offer period of a mortgage deal) is coming to an end. But, it could also be that property values are predicted to fall, or are falling, and you want to lock in a deal before you are affected or, your circumstances have changed and you need to change the terms of your mortgage.
Either way, it is an important decision that needs to be carefully researched before you proceed.
- You might getter a cheaper deal than you were previously on, and reduce monthly payments;
- If your needs have changed, you can change the terms you secure on the new deal;
- Where you have available equity, you can raise capital to invest elsewhere or in another property;
- Remortgaging a property typically takes less time than when you purchase;
- You can avoid reverting to your lender’s standard variable rate, which will typically be higher than arranging a new deal.
- If mortgage interest rates have gone up, your new deal may be more expensive;
- When you are within the deal period of your existing mortgage it will cost money to exit it;
- If property values have gone down, your current loan to value might be less than when you arranged your last deal and so the current available options may not be as good;
- Remortgaging a commercial property requires a lot of effort in terms of the research necessary and information gathering you have to do, it can also be quite stressful as a result.
Whatever your particular circumstances, a broker can be invaluable to you.
If you own enough of your property, so that there is enough equity left to extend your borrowing, then yes, you can borrow more.
You will need to know what the maximum loan to value is for your property and circumstances, and as a broker, Commercial Trust can help you with that information.
We have access to products from across the commercial mortgage marketplace. So, we can also make sure we match you with a lender that offers you the best financial outcome based on your revised needs.
Can I remortgage from owner-occupation to investment only borrowing?
Yes, you absolutely can move out of the commercial premises you had formerly run your business from and rent it out to a commercial tenant instead.
The majority of lenders have no bias towards applications from owner-occupiers or investors. Lenders may have products designated for one or other purpose, but it does not tend to affect rates.
Working out what you might pay per month, if you were to remortgage a commercial property, is a good first step in finding out if you will be better off.
You can use our commercial mortgage calculator to do this. If you are considering raising capital, you can also use a calculator to increase your borrowing and see what you could end up paying if you did.
Remortgaging commercial property is challenging but important. It has a direct impact on your finances, and in turn, your lifestyle.
With so many lenders to choose from and countless products along with them, making sure you get a deal that represents the best possible outcome for you is hard.
This is where a broker comes in.
At Commercial Trust, we specialize solely in landlord finance. We focus on this area of mortgages, so we can excel at it. Our aim is to provide the best possible deal to every client we work with.
Call us today on the Freephone number at the top of the page, use our live chat facility, or request a call-back.
Yes, and it may pay you to do so, if you are at the end of the deal period of your previous mortgage. Otherwise, monthly commercial mortgage charges are based on your lender’s reversion rate. This rate is typically higher than the deal you were on, and is likely to be higher than another deal your lender or other lenders can offer you.
A specialist mortgage broker can help you find a deal.
You can release equity from a commercial property, if the value of your property and the loan you currently have on it means you have room to borrow more.
E.g. if your property is worth £650,000 and you currently owe £325,000 then your loan to value is 50%. Where you can borrow up to 70%, you would be able to release an additional £130,000 in equity bringing your total borrowing to £455,000.
Be aware that if you increase your borrowing, it is likely your monthly payments will go up, because you are asking the lender to take on a greater level of risk.
The absolute maximum you can borrow on a commercial mortgage is 75% of the property value. However, if you do not have this amount in equity, you may be able to top-up using the equity in other properties you own, or by increasing the equity in the deal from savings or other sources of funds.
The amount you can borrow on a commercial mortgage is worked out in one of two ways:
Maximum borrowing as an owner-occupier commercial property
As an applicant who is running your own business from a commercial property, a lender will look at how well your business is performing. This will show them how likely it is that you can keep up with mortgage payments.
Some industries come with greater risks. Therefore, the industry your company is in can affect lending limits.
Maximum borrowing on an investment commercial property
Where you have a property you rent to another business (or businesses), the rent you receive affects how much of the property you can borrow.
Refinancing commercial property follows similar steps to any remortgage, but the products and requirements are a bit different.
You will need to establish how much you want to borrow, find out if lenders offer that level of borrowing and, if they do, find out which lender will offer you the terms you want, combined with the lowest mortgage interest rate.
Once you have done this, you can make a mortgage application. Some commercial lenders will require an application to be through a mortgage broker (intermediary).
Using a specialist mortgage broker can be a very practical way to remortgage commercial property.
With so many lenders in the industry, trying to research all of them, to ensure you are getting the best possible deal, is a huge challenge.
What’s more, as an individual, you will be unable to work with a large proportion of commercial lenders, unless you use an intermediary (a mortgage broker). This means you could stop yourself from being able to secure a deal that is the right one for you.
A broker will take a huge amount of the work off your hands. After a conversation to ask you about your property and finances, a broker will do all the research necessary to match you to a product.
A broker has access to lenders from across the market, and day-to-day insights on borrowing opportunities that can be of huge benefit to you as the applicant.
To chat through the process in more detail, or get the process of remortgaging your commercial property underway, speak to our specialist advisors.