INTRODUCTION
In simple terms, loan to property values for commercial investment mortgages are dependent on industry sector and the quality of tenant. In general however, for small or medium sized loans a good yardstick for the borrower to consider would be an approximate maximum loan to value of 70%; with up to 85% available from certain lenders in certain circumstances.
The length of a commercial mortgage loan period will tend to be a maximum of 30 years. Borrowers should also be aware of the fees in the commercial mortgage market; typically there will a lender fee of1 - 2% and a more expensive commercial valuation than would be applicable to a similarly valued residential property. Given the nature of the complexity of titles and covenants on many commercial properties, a higher legal cost will be incurred, not only through the borrower's own solicitor, but in many instances the lender uses its own solicitor in parallel to validate the quality of the work, this cost also needs to be factored in.
The value of a broker within this field cannot be overstated, due to the bespoke nature of each commercial mortgage transaction. Commercial mortgage terms are not set in stone and the broker's role in the transaction is to know which lenders are likely to have an appetite for each proposal, and therefore to negotiate the best rate and terms.
It should be noted that if you initially struggle to achieve the interest rate you had targeted, it is worthwhile keeping in mind that you will have the opportunity to re-mortgage with another lender to achieve your optimum rates and terms at a later date.
