Things to watch out for
A commercial mortgage is a significant investment for any business. That’s why we believe in making sure our customers fully understand the potential advantages and disadvantages before they enter into any agreement with a lender.
Our experienced consultants have pulled together a list of potential pitfalls, so familiarise yourself with these and bear them in mind whilst considering a commercial mortgage:
- Substantial Deposit – a lender will typically require a business to contribute between 30 and 40% of the loan amount up front. Naturally, this is a substantial amount of money, which might also need to be used for other purposes.
- Relocation – whilst renting business premises, relocating is relatively easy. However, once you own your premises, bear in mind that it may not always be easy to sell.
- Interest Rate Fluctuations – in the UK most commercial mortgages are based on variable rates. This means your mortgage repayments will be exposed to an increasing Bank of England base rate. Likewise, your business will also benefit during periods of falling interest rates.
- Maintenance – unlike renting, you’ll no longer have a landlord or property agent who should maintain the property for you. Purchasing your own business premises means you’ll be responsible for; security, heating, light, water, general maintenance, insurance and more.
- Business Capital – property values can go up and down for many different reasons. It’s important to remember that any decrease in the value of your business premises will result in a decrease to your capital or assets.
