If You Know What To Do And How To Do It, You Can Obtain A 100tv Commercial Mortgage

If You Know What To Do And How To Do It, You Can Obtain A 100% Ltv Commercial Mortgage

By:


At first glance commercial mortgages and residential home loans appear to be similar, however there are some fundamental differences between the two, normally when the issue of 'loan to value' is raised. Loan to value ratios are an indicator of the levels of risk the bank or lender is willing to undertake when lending o a commercial enterprise. Typically they will lend only 75 per cent of the total value of the mortgage and the borrower will have to produce a 25 per cent deposit.

Often, it can be hard to find the 25% deposit you need to buy a commercial property because your cash is tied up in your business. So, our article explains how it is possible to obtain a commercial mortgage of over 75%.

Additional Security Lenders like to minimise their risk when agreeing commercial mortgages. So, a way to help your chances of obtaining a high 'loan to value' is to offer some additional security for the mortgage. In many cases, the commercial property will simply be the property that you are looking to buy.

However, you could offer the lender the additional security of another property. For example, if you own other commercial properties or a residential property, the commercial lender could place a legal charge against one of these other assets in order that they benefit from additional security for the lending.

Lengthen the Mortgage Term: A simple one to explain, the longer the time period to pay back the mortgage, the lower the monthly payments will be. But expect to pay thousands more in interest payments as it takes longer to pay off the capital. This is why lenders would be more willing to up the LTV threshold as they benefit from thousands of pounds extra in interest payments.

From Tenant to Landlord: If you are currently a long term tenant within a commercial property that has been placed on the market you may have the option of buying the property yourself. Depending on the lender and the valuation, you could expect to gain the freehold for the property at a discounted rate.

Because you have managed to negotiate a discount a lender might be interested in lending to you a 100 per cent mortgage. Why? Well it is simple banking calculations. Assuming it is an attractive property worth GBP150,000 and you have picked it up for GBP120,000, the bank can risk its 100 per cent mortgage knowing it is sitting on at least GBP30,000 of market equity. If you default the property will still turn a profit at auction.

Value Added: If there is the possibility that you can reconfigure the site, or extend or renovate the commercial property, a lender may consider a higher mortgage. This is true if you plan to add value to the property through the improvements and that these renovations will attract a higher class of tenant.

You would need to ensure however that the cost of adapting the property to add value will be covered by the increased rents that you would receive you will need to do some research in order to assess this, and make sure that you speak with a property valuer to assess the anticipated works.

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..

About the Author:
Howard O'Gollegos writes for Just Commercial Mortgages the UK's No1 site for the latest commercial mortgage rates and commercial property finance news.



Article Originally Published On: http://www.articlesnatch.com


Tags: , , , , , ,

|

Loading...
Related....
Videos...

Recent UnCategorized Articles

Comments

Still can't find what you are looking for? Search for it!

Loading

Site Navigation:

Copyright 2005-2011 ArticleSnatch, LLC - All Rights Reserved.
Privacy Policy | Terms of Service.