Working towards owning your own commercial property has many positives, you can:
- Pay yourself to ‘rent’ your own space
- Customise the building for your needs
- Combine functionalities to streamline your process
- Expand at your own pace
- Sublet areas of your building, and more
However, despite its innocuous title, approaching a commercial mortgage is entirely different from that of a residential mortgage.
So what are the main differences?
Mainly, borrowers need a much larger deposit to secure a commercial property. While residential properties can be secured from as little 5 per cent, lenders usually demand a minimum deposit of 30 per cent of the purchase price, plus costs.
In addition, the use of your building is restricted by the mortgage you take – this means that your warehouse cannot necessarily become a retail outlet without earlier consultation with your lender.
Why will I need legal advice?
Commercial mortgages can present a minefield of options, opportunities and pitfalls.
To prepare a fair and accurate application for your commercial mortgage, you need legal counsel to assist in building your case to negotiate fees, repayments and terms of your contract.
Your legal counsel will be able to put forward your:
Lenders want to know that your business can afford the mortgage on the property and the repayments
Use of the property
To judge the risk, lenders will often approach the application for a commercial mortgage in two ways: 1) What sort of property is it? 2) What sort of business is going into it?
Not all properties or businesses are made equal, so these factors will be considered to estimate the inherent risks and opportunities if in the unlikely event your business can no longer afford the repayments
Interest on whether the property will be sublet
While many buildings lend themselves to subletting – such as an office block – taking on a property like this changes the structure of your mortgage. Instead of being a pure owner-occupied mortgage, it moves into an investment threshold. Understandably, there are risks associated when the borrower relies on a level of occupancy to make repayments. Conversely, a property with a high occupancy rate is a more attractive option for lenders.
How legal advice can help you
With adequate representation, your legal counsel can put your business and its growth in good stead with:
We understand the landscape and know how to access opportunities that benefit you and your business
We take the time to understand your business and property needs for now and in the future. Whether you plan on turning the property into your corporate headquarters, manufacturing plant or storage facility, we can guide your application to help you make the best, informed decision
Understanding the intricacies of commercial mortgages, we can decipher what is expected of you and help you communicate exactly what you’re prepared for when it comes to settling on a contract
Don’t leave your commercial mortgages to chance, get expert help from the start. For more information on how legal advice can help you secure the ideal mortgage, talk to our debt collection experts and call us today.