Commercial mortgage for complex mixed use premises

A well-established family business specialising in waste management had recently undergone a structural change. The father, who had run the business for many years, was looking to retire and pass over the reins to his daughter.

In addition to taking over the running of the business, the daughter was keen to buy the freehold of the premises, which hitherto had been leased to the company. The premises, located in Manchester, consists of a warehouse, yard, office and a two-bed rental flat.

The daughter, who is also a part-time landlord with a portfolio of five residential properties, planned to buy the freehold in her personal name and create a new lease through which to let the commercial element back to the waste management business.

To do this she needed to pull together a substantial deposit in order to stand any chance of securing a commercial mortgage. Fortunately, her father was able to help and gifted her £317,500.

Realising that getting finance from a high street lender would be tricky, the daughter’s mortgage broker approached Keystone for help knowing that its lending criteria accepts:

  • Borrowers with little commercial property or business experience
  • Related transactions
  • Gifted deposits
  • Mixed-use property

The Keystone business development manager helped the broker to compile and submit a comprehensive proposal which included details of the daughter’s personal circumstances, business ambitions, a strong business plan and an understanding of the set-up of the entire premises (including a rent increase on business element in two years’ time).

Having considered the proposal carefully, the Keystone underwriters agreed the following terms which were accepted by the daughter:

Property value: £575,000

Loan amount: £257,500 

LTV: 62%

Rate: 7.99% term tracker

Term: 10 years interest only

Product: Keystone Commercial Mortgage Range

Mortgage payment: £2,470 pcm

Rental income: £5,210 pcm (from both the business and the flat)

Lender arrangement fee: £10,725 

Gross yield: 11% pa

Consultant: Phil Riches, 07891 499274