Background essentials So you want a “Commercial Mortgage?” – WHY? Is our first question! Out of every 10 people who call us with this enquiry, we give quotations on perhaps no more than 3 cases. For the other 7 cases, we help the client finance the deal by far cheaper "Buy to Let" Finance. To advise, it needs practical experience as a landlord and a good share of common sense mixed with creativity. Commercial Finance deals typically start at the negotiating table at around BBR + 2% - 3% depending upon the nature and strength of the deal. We can usually manage to help negotiate a deal at BBR + 1.25% upwards – occasionally less. E.g. Generally you will be able to borrow less for say Pubs and care homes (perhaps 70-75% LTV – and if you have no experience of either or do not have detailed plans on how you are going to make money from the deal, the rate will be higher or you may be offered less, or even refused! Development finance is the “bread and butter” of many lenders. It is seen as a higher risk than the immediate acquisition of a “ready made” residential property – but lenders are keen to attract borrowers with a successful track record in this area. Between 70-85% can be borrowed “depending on the strength of the deal” and “the appetite of the lender for these deals” at present – two frequently used expressions of the people lending the money!! As with all commercial deals, we approach 2 or 3 lenders we know to try and get the best deal for a particular client depending on the project they are seeking to finance. Bridging Finance is (hopefully) very short term and should be avoided if at all possible. However, sometime it is necessary if plans go awry and we can help. Typically BBR + 2% is the starting point – PER MONTH! We can usually get this down to BBR+ 1% - 1.25% plus costs Other schemes are manifold! Owner-occupiers of freehold trading premises are able to get better deals than those letting to a 3rd party – and far better deals that leasehold premises of any sort. Pubs & Restaurants: Lenders, who sometimes will only lend 60%, unless a proven track record is available, look at pubs and restaurants and their fleeting fashions very selectively. Similarly, Nursing and Residential Care Homes are considered in a similar category by prospective lenders. We can usually get a “roll up period” on interest or an it period for say 12 months – but all commercial deals if longer term are invariably "Repayments" Deals. The Current Marketplace –deals are more scarce than say a year ago, targets need to be met, and some new lenders are around, keen to lend where the traditional marketplace would have said “No” Recently, we have assisted several of our portfolio landlords to buy premises on deals that their longstanding bankser could not, or would not finance – so we look forward to hearing from you. © Peter Willingham 2007
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