Commercial mortgages

A commercial mortgage is a loan to purchase business premises with the commercial property used as security. Commercial mortgages are taken on by businesses rather than individual borrowers.

The borrower may be a partnership or a limited company and it is the business which is assessed for creditworthiness rather than the individual. In the event of default the lender can normally repossess the property.

Commercial Mortgages are usually available for a term of between 5 and 30 years and can be for a variety of purposes:

• To purchase the premises of the business.
  
• For the extension of existing premises.
  
• Residential and commercial investment.
  
• Developing the property in other manners.

Most banks and building societies offer commercial mortgages, but the application must satisfy the lenders' criteria. The lender would require a customer stake, usually a minimum of 20% of the lower of cost or valuation and the lender's decision will be based on an assessment of the current business - a commercial lender will expect the business to be stable and profitable.

There may also be a requirement for a business plan together with financial projections to confirm the ability to make repayments on the loan. The terms and conditions of a commercial mortgage can vary depending on the type of business and the type of premises or land being purchased.