Commercial Remortgages
Need to refinance your commercial property? Find out the typical rates that commercial remortgages attract and exactly how to get them in our expert guide!
What type of commercial property are you looking to mortgage?
No impact on your credit score
Commercial remortgaging is a business financing option with a range of possible functions, including reducing your costs, funding expansion or investing in other properties. It shares similarities with residential remortgaging, but has some notable nuances.
In this guide, we’ll explain these differences and everything you should be aware of before you begin the remortgaging process.
The following topics are covered below...
Can you remortgage a commercial property?
Yes, you can remortgage (i.e. switch from one mortgage to another) on a commercial property, just as you can with a residential property. The process is quite similar to remortgaging your home.
You’ll need to:
- Identify the best lender for your situation
- Make an application, providing all the relevant business accounts and paperwork
- Pass the lender’s eligibility checks and affordability assessment
Businesses often choose to work with a broker to do this, as they’re the experts in finding the right lender and making a strong application. This makes the process far less time-consuming and can result in cheaper repayments.
Get Started with a Broker
Maximise your chance of approval with specialist advice from an expert in Commercial Remortgages.
Benefits of remortgaging
Refinancing a commercial property has several possible advantages.
It might help you to:
Reduce your rate
You may have signed up to a fixed-rate deal for a specific period when you took out the mortgage, which is now coming to an end. Once you move to the lender’s standard variable rate (SVR), your monthly repayments will probably increase. So, you could save money by shopping around for a new fixed-rate deal or another offer.
Release equity
If you’ve paid off a significant portion of your existing mortgage, you’ll have a large amount of capital tied up in property. It might benefit your business to release this equity, which you could use to pay off debts, invest in your business, or buy another property.
Raise capital
Even if you haven’t paid off a lot of your existing mortgage, you might still be able to increase your borrowing against the property, particularly if it has increased in value. This is one way to raise capital, which you can use to expand your business or for any other purpose.
For example, let’s say you’d taken out a 60% mortgage on a £200,000 property (i.e. £120,000) and the property value has since increased to £210,000. Borrowing against its new value, you could get an additional £6,000. However, you’d need to consider the costs involved before making this decision.
Change your mortgage type
There are two categories your commercial mortgage could fall into:
- Owner-occupier, which means that you are running your own business from the property
- Commercial investment, which means that you are letting the property to another business
Refinancing would allow you to switch from one type to the other, for example, if your business has outgrown the property you own, but you’d prefer to rent it out than sell it.
How a broker can help
While finding the best mortgage rate can be difficult, a mortgage broker can help. This is particularly relevant if you have one or more factors working against you, such as a high LTV, a specialist business area, a short trading history, or poor credit history.
None of these factors will necessarily prevent you from getting a mortgage. But it can make the job of finding the best possible rate just a little harder.
An expert mortgage broker – and specifically one who specialises in commercial remortgages – can use their experience in this field to find you the right deal.
If you get in touch we can arrange for an advisor we work with to contact you directly.
Our Broker-Matching Service Guaranteed!
We want you to have complete confidence in our service, and get the best chance of securing your mortgage. We guarantee to get your mortgage approved where others can’t – or we’ll give you £100*
Costs of remortgaging
While there are many good reasons to remortgage a commercial property, you shouldn’t jump into the process without thoroughly considering the costs involved.
These include:
You may need to pay a fee to your existing mortgage lender to exit the loan before the end of the term.
A typical early repayment charge for a commercial mortgage is 2% of the remaining loan amount.
The fees you’ll pay for a commercial mortgage are usually higher than they would be for a residential mortgage, so it’s important to check that remortgaging is in your best interests financially.
The typical arrangement fee for a commercial mortgage is 1-2% of the total loan amount.
You should budget several thousand pounds for legal fees to cover the remortgaging process. Again, this cost can be higher than with residential mortgages, which require less legal administration.
Commercial remortgage rates
Finding exact rates for commercial mortgages will be quite tricky as most lenders in this area will offer bespoke rates depending on your specific business requirements, based on a wide range of determining factors. Currently (May 2023), typical interest rates for commercial mortgages would likely range between 4%-10%.
The rate you’ll qualify for depends on:
Loan-to-value (LTV) is the percentage of the property value you’re looking to borrow.
When refinancing, the loan-to-value you’re seeking depends on how much equity you currently have in the property.
For example:
- If you have equity of £100,000 in a £200,000 property, you need to remortgage at a loan-to-value of 50%.
- If you have equity of £50,000 in a £200,000 property, you need to remortgage at a loan-to-value of 75%.
Some lenders will only provide mortgages for businesses in certain industries, so it may be easier to remortgage if you run a professional practice than if you run an agriculture business, for example.
Working with a specialist in your field can help you to find the best rate.
When they review your application, lenders will want to see your business accounts for the past several years.
You have a better chance of approval if you can prove you’ve been running your business successfully for a long time.
To check if you can afford the mortgage you’ve applied for, commercial lenders will look at your business’s earnings before interest, tax, depreciation, and amortisation (EBITDA) as an indicator of its profits.
If your business is fairly new, or your EBITDA is not enough to cover your mortgage repayments, that might limit your choice of lenders and you might not have access to the best possible rates. However, there is sometimes room for negotiation.
Lenders prefer mortgage candidates with a good credit rating. If there has been a change to your credit report since you took out your existing mortgage, such as late payments on debts or a county court judgement against you, that can limit your choice of mortgages and rates.
Reviews
Excellent customer service
I found Online Mortgage Advisors after I read lots of ratings online and I was not disappointed! I received a message soon after I intiated contact and within a week I received an Agreement in Prin...
Amethyst F
High Quality Mortgage Advisors & Excellent Service
Online Mortgage Advisor connected me to an excellent advisor who is helping me secure a mortgage on our first property purchase. Our advisors impartial advice, availability, and consistency in keep...
Chris
I have been really impressed with the service…
I have been really impressed with the service so far, I was given a agreement in principle within a few days, very impressed indeed.
Louise F
Calculate your new repayments
You can use our commercial mortgage calculator below to work out what your new mortgage payments will look like. Simply enter the details for the mortgage deal you’ve been offered or seen advertised to get started.
Commercial Remortgage Calculator
This calculator can tell you how much your new mortgage will cost you each month and overall. Enter the new amount you’re borrowing, the term length and interest rate, and our calculator will do the rest.
Monthly Repayments:
Total amount paid at end of term:
Get started with an expert broker to find out how much they could help you save on your mortgage repayments.
Get matched with a commercial mortgage broker
Commercial remortgaging can be complex, so it’s likely you have any questions about the process or the rate you might be eligible for. If so, speaking to an expert can bring you clarity and peace of mind.
We work with numerous brokers who specialise in commercial remortgaging, so we can connect you to one of them for a free, no-obligation chat. Just give us a call on 0808 189 0463 or make an enquiry online.
Get Started with a Broker
Maximise your chance of approval with specialist advice from an expert in Commercial Remortgages.
FAQs
Commercial remortgaging is one method of refinancing to raise capital for your business, but it’s not the only form of business refinancing.
Other options you might consider, depending on your goals, include:
- Asset refinancing, i.e. seeking a new lender to borrow against other valuable business assets, such as a fleet of vehicles
- Business loan refinancing, i.e. seeking a new lender for an unsecured business loan, either to reduce your rate or extend your repayment term
- Business debt refinancing i.e. consolidating your business debts into one larger loan, which could simplify and potentially reduce your repayments.
Ask A Quick Question
We know everyone's circumstances are different, that's why we work with mortgage brokers who are experts in all different types of commercial mortgages. Ask us a question and we'll get the best expert to help.
Pete Mugleston
Mortgage Expert, MD
About the author
Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.
Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!
