100% Ltv Commercial Mortgages, Myth Or Reality?

If you think obtaining a residential mortgage is as tough as it's ever been, then try cobbling a deal together for a commercial mortgage! While 80-90% Loan to Value (LTV) deals are very slowly trickling back into the residential mortgage market, the standard deal you could expect for a commercial mortgage in the boom years would have been a 75% LTV.

There may be ways, however, of finding a higher percentage and placing a lower deposit on a commercial property. This article will explore the various ways that this can be achieved. As it is becoming increasingly difficult to raise a 25 per cent deposit (a property of £200,000 will mean you have to put together a cool fifty grand), lenders are having to find new ways of doing business with prospective borrowers.

Offer Additional Security: As with residential mortgages, the property you are buying is usually the only security for the mortgage loan, meaning the lender is taking most if not all of the risk. So allay that fear by offering extra assets as security to the lender, share the responsibility.

Lower the Risk: By offering additional security, the lender may be happier to increase the loan to value. Normally, you will only be using the actually building itself as security for the loan, however adding additional security can lower the risk to the lender of your commercial mortgage making it a more favourable deal for them.

If you have any other buildings, then you may be able to allow the lender to put a charge on this property as extra security for your loan. You may also be able to use other business assets as security, but this is something that would need to be discussed with individual lenders. If you want to take this route it may be wise to employ a mortgage adviser to assist you.

Tenant Purchase: In some instances it is possible to purchase a freehold at a discount if you are the sitting tenant in a commercial property. In essence this simply means that the landlord will offer you a deal in order to quickly complete the sale and not have to find a new customer. If you can capitalise out of your landlord's need to sell and for it to be a simple process, then you should certainly consider this opportunity

Depending on the size of the discount, your commercial lender may offer you 100% of the purchase price as this only represents a lower percentage of the actual value of the property. If the surveyor confirms that the property is in a popular location and will sell easily, the lender may be even more inclined to allow you to borrow against the valuation rather than the purchase price.

Adding Value: Renovating a property or extending is known as adding value in the world of commercial lending, and this is a way in which the lender may consider offering a 100% commercial mortgage to you.

To undertake large scale renovations, you would need to be certain that the improvements would command a higher level of rental income from any potential tenants. You should research the market carefully in order to ensure you'll maximise your rental return. If it is feasible then you may be able to borrow the money you need on a commercial development loan which could later be repaid by a high LTV commercial mortgage.

So the borrowing options are numerous in obtaining a 100 per cent mortgage and the trick is to think like a lender. Lenders want good returns and low risk, you need to look at your personal circumstances and think about how you can offer that to them..