Which is a more viable option for a business owner? Owning your own premises or paying rent?
The answer for most business owners is obvious – they want to own their own premises? Why? Renting is dead money, and for an equivalent payment or even a lower outlay, you could own an asset that will only appreciate in value over the medium to long term. Furthermore, after you stop working, it could also provide you with an attractive additional income in retirement.
But how can I buy my own premises, you might ask. If you are currently renting and you like your premises, you could ask your landlord if he is interested in selling it to you. Alternatively, you may want to move into bigger or more suitable premises and could look at premises for sale rather than to let. Either way, you will need a commercial mortgage to buy your own premises. Here we need to make a distinction – you would not be applying for a mortgage for investment purposes but as an owner-occupier, and therefore, you don’t need to have any previous experience as a landlord. Lenders are very comfortable with business owners taking out a mortgage to buy their own premises.
How much could you borrow? Most lenders will lend up to 70% of the purchase price or valuation, whichever is the lower. It is possible to get higher loans, but you would be wise to expect to raise at least 30% of the purchase price by way of a deposit.
It is important to understand that lenders are very cautious and need four essential criteria to be aligned before they will consider making you a mortgage offer.
Firstly, they want to be sure that the property their loan is secured on is mortgageable.
Secondly, they have to be convinced that your profits after making certain adjustments are more than adequate to service the loan.
Thirdly, they will want to look at your personal credit standing to ensure you have a track record of both taking credit and consistently paying for that credit every month – no defaults, no CCJs and no bankruptcies; Some adverse credit may be acceptable.
Finally, they need to be comfortable with the industry you are working in.
Some industries will not be considered by any lender. For example, during the COVID-19 pandemic, lenders would not consider mortgages for non-essential retail premises.
In order to get the best rates and to guide you through the process of purchasing a commercial property as an owner-occupier you should seek advice from a reputable broker. Here at Exel Finance we have access to the whole of the market and can not only source the best deal for you but assist you in every step of the process in obtaining an owner-occuipier commercial mortgage.
