Introduction to commercial mortgages «

Introduction to commercial mortgages


Commercial mortgages work in a similar way to domestic mortgages, with the difference being that they are used to buy a business property or raise cash for business purposes. Just as your home is used as security for a residential mortgage, your commercial mortgage will be secured against your business property.

The scope of what a commercial mortgage can be used for is vast. Commercial owner-occupier mortgages are used by a wide variety of business owners of both small and large companies to buy premises from which to run their business. It’s possible to obtain a commercial mortgage for just about any type of property – from factories, workshops, warehouses and offices to restaurants, cafes, shops, hotels and guest houses. They can even be used to purchase properties such as farms. Commercial owner-occupier mortgages are also sometimes used to purchase an existing business as well as the property from which it is run. This often happens with restaurants, hotels, takeaways or shops.

Commercial mortgages can also be an excellent means of raising capital. As with residential mortgages, it’s possible to use the equity in a property as a form of loan, which could be used for a vast range of business purposes.

Alternatively, a commercial mortgage could also be used for buy-to-let or property development purposes. With buy-to-let, property (either residential or commercial) is purchased as an investment in order to make money from renting it to tenants. With property development, a commercial mortgage allows a property developer to purchase a property in order to renovate or adapt it with the intention of selling it at a profit.

 

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