Due to the down-turn in the economy over the last several years, large numbers of former commercial premises have been vacated. There is scope now to purchase these buildings at modest prices either to trade from or to convert into dwellings. Similarly, if you own a Commercial Property, such as a Hotel, Block of Flats, Shopping Centre, Golf Course, etc., we may be able to finance or re-finance at a more affordable rate than previously. Contact LEA FS to see what we can do for you.
What do we mean by a Commercial Mortgage?
There has been some blurring of the definition in recent years. Until about 15-20 years ago, the only way to buy a property to rent out (whether as a residential dwelling or to a trading business) was to take a commercial mortgage from a High Street Bank. All of these loans were repayable over quite short periods, typically, 12-15 years and were repayable on a Capital plus Interest basis. Nowadays, most individual buy-to-lets are bought with the aid of an interest-only loan that is similar to a residential mortgage and provided by Building Societies, Banks or Specialist Lenders.
Commercial Mortgages (and remortgages) are loans that are secured on property used for a commercial purpose. This could be a factory, shop or store, land or other commercial enterprise. Although unusual, it is possible for Commercial Mortgages to be regulated if the borrower or a close family member resides in at least 40% of the property floor area.
Commercial Mortgages are normally available to owners and purchasers of commercial properties either for letting, leasing or for personal use. These mortgages are also suitable for owners of blocks of flats which are to be let or groups of residential investment properties (Buy To Lets). It remains common practice for these loans to be set on a Capital plus Interest basis and it is rare for the term to exceed 20 years.
Other uses for this type of mortgage is to support a development of a site for future sale or for letting. Typically, these are referred to as Development Loans and, on occasion, the interest on these loans may be 'rolled-up' and repaid when the properties are sold on or let. In effect, these become Bridging Loans and the lenders may also seek other security for the loans, taking a charge on other commercial or personal property owned by the borrower.
If a developer has acquired a plot of land and has obtained permission to build on it or if he has acquired a disused building and obtained permission to convert it, he will often seek a loan to enable the development.
Specialist lenders thrive in this market though there is less interest in Plymouth and the surrounding area; the predominant interest is for developments in London and the South-East.
Typically, a Development Loan will be for a relatively short period (maximum of 3 years) to cover expenditures during the construction or conversion phase. The lender may wish to take a charge on some other property so as to reduce his risk, the loan could be released in stages according to a plan agreed at the outset and the lender may agrgee to rolling up the interest.
Ultimately, the intent is to repay the loan from sale of the property or by transferring onto a lower interest ongoing mortgage with a standard commercial mortgage lender as soon as the property starts to yield rent.
If you have a development in mind and would llike advice on just what is available, give us a call.
Asset Finance can be used for a variety of purposes, perhaps the most obvious is to enaqble a business to acquire tools, vehicles, equipment, furniture, etc. without using its own financial reserves,a finance company purchases the required items for use by the business and leases them to the business for an agreed period. Typically, at the end of that period, the business has the right to purchase these items for a residual value as specified at the outset. This can be a very tax-efficent way of obtaining much needed equipment as the leasing costs is treated as an expense to the business and the asset is not included on the Balance Sheet.
Asset Finance can also be used, in certain cases, to release value on items owned by the business in order to obtain new equipment. In that event, the existing items are 'sold' to the finance company and leased back. They are removed from the Balance Sheet and the leasing cost is an expense item.
If you would like to discuss your options to acquire equipment using Asset Finance, contact us.
Recently, new lenders who will use existing assets as security for short term loans have entered the arena. If you have a bill to meet in the immediate future and do not have a suitable property on which a loan could be secured, you may wish to talk with us about securing the loan on a valuable piece of art, jewelery or some other item.