Glasgow Commercial Mortgage

Commercial Mortgage for Property and Land in Glasgow and all areas of Scotland

Can anyone apply for a commercial mortgage?

The quick answer is no they can’t.

Because a commercial mortgage is separate from a borrowers residential mortgage on their main residence, it is calculated in a completely different way and the acceptance criteria is completely different to a residential mortgage too.

The official bank view of a commercial mortgage is a “mortgage to buy, refinance, refurbish or develop a property or land that is used solely for business purposes so it is for non residential property.

What types of commercial mortgages are there?

As noted above, there are actually 3 types of commercial mortgage but it’s a bit more complicated than that. Let us explain.

Whilst it is commonly accepted that there are bridging loans, development finance and commercial mortgages making up the ‘catch all’ of commercial mortgage, it can be broken down into two different ways.

Short term lending & long term lending

Both bridging loans and development loans are classed as short term lending because the maximum borrowing term is 24 months.

Long term lending

A commercial mortgage is classed as long term lending (known as term loans) because they can be taken over anything from 5 years to 30 years. Within this classification, there are two types, they are:

Commercial Investment Mortgage

This is where the property you are buying is going to be used for commercial purposes and you are not going to be living in it or running your business from it.

An example of this is a private landlord in Govanhill, Glasgow who bought a 5 bedroom Victorian property at auction. Although he purchased it using bridging finance, once he had refurbished the property and converted it into 8 separate rooms with en-suites (commonly known as a HMO), he wanted a long term commercial mortgage to reduce his borrowing costs (a bridging loan is way more expensive than a commercial mortgage) now that he is receiving income from his fully let property.

Owner-occupier commercial mortgage

This is where a small business owner or SME, will be either:

1. Buying the property they currently trade from or
2. Buying a property to move their business into

An example of this is a garage proprietor from Paisley, just outside Glasgow who wanted to buy the building that he had operated his garage/MOT business from for the last 15 years. Not only will this present him with an opportunity to see a capital increase in the building and land that he has purchased, it also secures his future by not being left open to the vagaries of a landlord who may decide to cancel his lease at any time.

Do you need planning permission from Glasgow City Council?

Not unless you are making changes to the layout of the building or you are thinking of building a new property on bare land. Even then, not all changes to a buildings layout will mean you have to apply for planning permission. Some refurbishments or office conversions are done through something called Permitted Rights Development (PDR). This is where planning is a given and from the time of application to getting approved and can just a couple of days at most.

Can a Buy to Let landlord obtain a commercial mortgage?

They can and often do but usually, the cheapest and quickest way to finance an investment property will be through a BTL (Buy to Let) mortgage.

How much can you borrow?

Most commercial mortgage lenders will provide loans up to 75% of the property value or purchase price – whichever is lower. However, there are some new banks and specialist mortgage lenders who will provide up to 80% Loan to Value.

In terms of actual amounts that can be borrower, the minimum loan is £50,000 and the maximum loan is £50m but of course it depends on the scheme, the borrower and the location.

What type of property can be considered?

There is a wide variety of property types (or security as lenders like to call it) that can be mortgaged, the following list isn’t exhaustive but it gives you an idea:

• Office
• Warehouse
• Pub, bar, restaurant, cafe, hotel, B&B
• Nursing home or care home
• Land with or without full planning permission
• Gyms and leisure centres
• Doctors surgeries
• New housing developments
• New apartment blocks
• Any commercial building where a business owner operates from and would like to buy – known as an owner-occupier commercial mortgage

Commercial Mortgage Borrower Requirements

Because a commercial mortgage is operated differently from a residential mortgage (like on your main home), mortgage lenders are not able to use your salary to calculate whether they can lend to you or not as it simply does not apply. The best way to look at this is to understand that a commercial mortgage is different and in no way connected to you personally, in effect, it is a business mortgage, not a personal one.

3 years business accounts

In every case, a lender will want to see a full 3 years trading accounts for your business. This will include a balance sheet, profit and loss account and potentially, SA302 statements from HMRC. There are a small number of new alternative finance providers who may look at offering a mortgage without 3 years accounts but they certainly wouldn’t look to offer up to 80% LTV.

Credit history – must be clean

Whereas with other types of commercial lending you can obtain finance with some adverse credit, with a commercial mortgage, you can’t unless the bad credit is historic, for example, over 6 years ago.

Personal Guarantee

All business mortgages come with a requirement for the borrower to provide a personal guarantee (PG). This is where all assets owned by the borrower will come into play should the borrower fail to keep up repayments on a commercial mortgage, bridging loan or development finance. The lender can (if they want to) apply to repossess another property that the borrower may own and this can include their main residential home.

Mortgage deposit

Every borrower will need up to 30% as a deposit in most cases, some times it will be just 25% but it will rarely fall below this.

Which areas of Glasgow do you lend in?

Everywhere from Pollockshields, Govanhill, Hillhead, Govan, Langside and all areas in between

Apply for a Commercial Mortgage in Glasgow

Trying to navigate around the world of commercial mortgages can be difficult because it is one of the most complex areas of property development and mortgage lending. Here at The Finance Business we have the people who know what to do and with who.

We will do everything from preparing your mortgage application to presenting it in a format that the banks like and of course, we won’t charge you a broker fee either.

If you need a commercial mortgage, please apply here or call us on 0151 329 3964