• Buy to Let Commercial Mortgage – Explained

    Some confusion exists as to what a buy to let commercial mortgage actually is. Some brokers and lenders used to regard residential buy to let mortgages as commercial propositions, leading to a mindset that all buy to let mortgages were commercial in their nature.

    With more property investors eager to include commercial property in their portfolio commercial lenders were forced to create mortgage products specially crafted for the commercial property investor. Taking a look at the whole market the main types of buy to let commercial mortgage products can be defined under the headings “the good”, “the not-bad” and “the ugly”.

    The Good

    The highest quality of investment property would have very good quality tenants on a long lease and occupy the best location. Because of the stability of the tenant these properties become very attractive to the institutional investors, resulting in slightly inflated values. These higher values can put pressure on the buy to let commercial mortgage by reducing yields.

    The Not-Bad

    These investments would similar to blue chips, with the likely exception of the quality of the tenant. Instead of a well established business, such as a national chain or franchise, the tenant may be a smaller concern. Because the values of these properties are more realistic they can offer more attractive rental yields, resulting in more interest from smaller investors.

    The two types of propositions described above are the ones most likely to be funded by banks or building societies. These high quality buy to let commercial mortgages will obviously attract the most impressive rates and flexible terms.

    The Ugly

    Well, OK, ugly is probably a bit harsh.  These are the self-cert type of investments.  The property may be purchased speculatively or in need of upgrading before being returned to the rental market.

    Investors in this market have historically struggled to find a buy to let commercial mortgage at sensible rates, however specialist commercial lenders have entered the marketplace, meaning that there are more opportunities to be seized.

    Buy to let commercial mortgages present an great opportunity to take advantage of the rich vein of commercial investment properties available at the moment. You must look carefully at all the criteria which go to make it a good investment and get some professional guidance to find the best mortgage arrangement.

  • Commercial Mortgages, are brokers necessary?

    There are an estimated 5.2 million commercial properties with in the UK with the total size of the retail, office and industrial stock presently estimated to be over £610 billion. It may surprise you to find out that 52% of these commercial properties are investment stock. The remainder are obviously owned by owner-occupiers, mostly using a commercial mortgage to pay for them.

    It should come as no surprise then that there has been a substantial rise in the number of investors looking to buy commercial properties, despite the confusion caused by the government’s change of heart over the use of commercial property in pension schemes.

    With this increased interest in commercial property by investors and business owners alike the role of the commercial mortgage broker has become a more integral part of the process. Since the Financial Services Authority (FSA) took over regulation of residential mortgages in November 2005 over 60% of mortgage brokers claim profits are down.

    Commercial mortgage lending is no longer the preserve of the high street banks. In the past the mainstream lenders seemed to cherry pick customers and would show a preference towards existing customers.

    Well that has now changed. In a competitive market the advantage passes back to the well informed customer. Because three years audited accounts are no longer a requirement and adverse credit clients are now considered, the choice of commercial mortgage products requires an in depth knowledge of the commercial mortgage market-place.

    Do your homework, and make sure that if you are using a commercial mortgage broker he has done his too!

    [tags]commercial mortgage broker, commercial mortgage[/tags]