Whether you are a new business or a more established one when it comes to the time of buying property you will probably need some sort Commercial Mortgage to allow you to do so. Your business may be directly linked to the property (for example a retail outlet, hotel, public house or takeaway) or it might be that have out grown your old premises and you require new property for expansion. Commercial mortgages can help you buy land and build new property, extend your existing property or buy more premises.
The main difference between commercial mortgages and regular mortgages is that the lender has legal claim over the mortgaged buildings or land until the whole loan is repaid, if payments are not made on time you could lose your property possibly leaving your business incapacitated or bankrupt. In the event that your land or buildings are repossessed they will be sold and used as payment of the debt.
There are two main types of commercial mortgage: "Own-Use" and "Commercial Investment". Own-use type commercial mortgages are for the purchase of property to be used directly by your own company. Commercial investment types of commercial mortgages are for the purchase of land or buildings that you intend to rent out, for instance industrial or retail units.
Methods of repayment of commercial mortgages can vary depending on what scheme you choose. It is important to choose a scheme that suits the size and nature of your business. Some schemes have monthly repayments, where others have quarterly, or annual payments. The different schemes are designed to maximise your capita and cash flow so that the mortgage has less effect on the business it self.
Most high street banks and buildings societies will have commercial mortgage schemes in place and interest rates and repayment methods can vary widely. Their requirements will also vary quite dramatically too with some requiring previous positive credit history for your company while other are designed to help new businesses and will offer loans based on advance credit history.
There are some hidden costs and binding factors to be careful of when taking out a commercial mortgage that should be budgeted for in advance; setup, admin and legal fees are common and you should always enquire as to their estimated cost well in advance so that you can adjust our budget accordingly. Watch out for redemption charges on the mortgage, most will have a redemption charge period (3 - 5 years) where if you choose to payoff or back out from your mortgage early you will be charged. Fees are also common at the end of the mortgage, before the property is handed over to you there is likely to be various closing costs including be valuations, document processing fees, and legal charges so remember to budget in the long term.©MoneyHighStreet.com