You could be looking to buy your own property, re-mortgage or are looking to release equity secured against an existing property to grow your business. If so, a commercial mortgage could be the right solution for you.
When applying for a commercial mortgage, it’s best to consider the following points:
Look at the bigger picture
Don’t just go chasing the best rate for your mortgage. It’s important to know about any early repayment charge/exit fees and whether you can make overpayments in the mortgage, what the overall fees are, any payment holidays, length of term, etc.
Carefully look at the deal and understand the lender in totality.
Know your Fees
Make sure you understand the fees involved when buying a commercial mortgage and precisely when these are payable. The typical types of fees you will encounter are:
1. Valuation fees
The valuation of a commercial property is far more complex than a residential mortgage. Hence the fees on valuation are higher than a residential property. These start from £700 onwards for a simple case (dependent on the property and its value). This will be payable before an offer is produced and is normally not refundable.
2. Arrangement Fees – These are fees taken by the lender and usually added to the loan amount upon completion. These range from around 1-2% of the full loan amount.
3. Booking Fees – Some lenders charge an upfront administration charge from £200 to £250 to cover the charges of their initial work. These may be payable upfront and potentially non-refundable.
4. Legal Fees – You will have to bear 2 sets of legal fees, one for the bank and one for yourself. This can either be done by separate solicitors or joint representation by the solicitor if the bank allows it. It is always best to get a fee estimate from your lawyer. It is of vital importance to have a good solicitor that represents you as it helps to speed up the process.
Grab the Best Deal
It is best practice to save money and shop around a few different lenders to make sure you are not paying excessive costs for your property. So, it may be logical to have a specialist commercial broker on your side. Some brokers may charge up to 1% of the loan value while others could charge a standard £500 for any size deal.
However, you will find brokers who don’t charge a fee at all (called Fee Free Brokers). This is due to them receiving commission from the bank where they have successfully placed the case.
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