What is a Commercial Remortgage?
A commercial remortgage is the process of taking a new mortgage on a commercial property you already own. This is one of the best ways to release equity for investments and purchases, whether that’s for new properties or for your own business. A commercial remortgage is a good way to find more competitive interest rates and reduce monthly repayments to take pressure off your cash flow.
When Should You Remortgage Your Commercial Property?
You should consider a commercial remortgage if you want to:
- Reduce interest rates on your loan and lower monthly payments
- Release equity quickly for investment purposes (land, buildings, machinery, and other assets)
- Improve cash flow
- Access financing for business growth or refurbishment quickly without taking out an expensive loan
- Get a more competitive loan with better terms for your premises
Residential Remortgage vs. Commercial Remortgage
The main difference between a standard residential remortgage and a commercial remortgage is that the commercial remortgage can only be secured against non-residential property. Another difference is that commercial remortgages are more tailored to commercial property values and your specific business needs.
How Does a Commercial Remortgage Work?
This follows a similar process to remortgaging a residential property. Your broker can source the best deals for your business and discuss the loan with you to determine the option best suited to your investment and/or business needs, including custom terms and interest rates.
You can refinance upwards of £25,000. Usually, interest rates are variable based on either the Bank of England Base Rate (BBR) or the lender's Standard Variable Rate (SVR). Rates are typically negotiated depending on your risk profile and the sector of the business occupying the commercial property.
The majority of commercial mortgages come with a lender arrangement fee, typically 1-2% of the loan amount, and there may also be charges for valuations and legal work. Currently, the maximum loan to value (LTV) for a commercial remortgage is 75%. You can find out more about our exclusive rates and fees here.
Pros and Cons of Commercial Remortgages
While refinancing your commercial mortgage offers several great benefits, including more competitive loan terms, the ability to raise capital quickly for investments, and improving cash flow, there are some drawbacks that are important to consider. This includes your business taking on additional debt, the fees associated with ending your current financing, and additional fees associated with starting a new mortgage.
Our mortgage brokers will help you evaluate these to give you a clear idea of the impact of commercial remortgaging for your business,. including This includes discussing elements such as broker fees, legal costs, valuation fees, fees associated with your current financing deal and more. We aim to help you make a fully informed decision to help your business grow.
How Much Can I Borrow?
Essentially, a business can borrow as much as necessary, from upwards of £25,000, as long as it meets lender affordability calculations.
Commercial lenders calculate how much a business can borrow based on various factors to determine what the business can afford, evaluating earnings before interest, tax, depreciation and amortisation (EBITDA).
Businesses that are considered low-risk by lenders tend to get the highest LTV and the best rates. You may be considered low-risk if you have considerable equity in the property, a good credit history, a good trading history, and a strong track record in the industry.
Key Considerations When Applying for a Commercial Remortgage
If you are considering commercial refinancing, please consider the following:
- Early Repayment Charges (ERCs) may apply to your current financing if fixed-rate
- Lending fees and associated costs may be applied to the new loan
How to Apply for a Commercial Remortgage and Eligibility Criteria
To apply for commercial refinancing, you will need to provide our team with documentation, including a current assets and liabilities page, certified financial accounts, income and expenditure documentation, and more. Our brokers will work with you to streamline this process and explain the exact documentation we will need to deliver your loan.
Why Use a Broker for Your Commercial Remortgage?
If your current commercial mortgage is approaching its end, now is the time to consider and review your financing arrangements. That’s where we come in! Need to borrow more? We can help with that too. We can look at your existing deal and, depending on your circumstances, steer you towards an appropriate commercial remortgage solution. Even if, ultimately, you decide to stick with your current lender, you have nothing to lose by asking us to find out if we can get you a better deal, including:
Better terms
Which lender’s borrowing criteria best suits your requirements? Don’t assume that your current lender is the best. They may have updated their policies since you first took out a mortgage with them and you could find that they no longer have the same lending appetite for the sector your business operates in as before.
Save money in the long run
Despite the upfront fees and charges associated with taking out finance with a different lender, you might find that you save money in the long run., in the long run, you save money. We’ll do the maths and present you with the various options so that you can take an informed decision. You can work out your monthly mortgage repayments with our mortgage repayment calculator.
Next steps
Talk to our qualified commercial mortgage experts directly to see how much you can borrow.
