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Remortgage a commercial property

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HomeRemortgageRemortgage a commercial property

Remortgage a commercial property

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Last reviewed on 29th December 2021

Commercial remortgages are different to residential remortgages, but the principles are very much similar. Whether you want to release equity or simply want to switch to a better rate, a commercial remortgage can allow you to do this.

Key features include:

  • 75% loan to value remortgages
  • Amounts from £25,000 to £25m
  • Lenders for limited companies, SPVs and individual borrowers
  • Mainstream and specialist commercial lenders
  • Commercial buy to let and investment purposes

If you’re unsure of what to do next, our experts can help you.

What is a commercial remortgage?

A commercial remortgage is a method used to refinance your commercial property. As the majority of commercial ownership is for investment, a remortgage can help to boost the profitability of your property.

The savings you make from a remortgage can then be used to buy additional property or for improving your existing investments. As a result, refinancing can enable you to leverage your commercial assets to expand your portfolio or your business.

Is a commercial remortgage different to a regular remortgage?

Although they’re similar, a commercial remortgage can only be used for a commercial property. It goes without saying, but you can’t approach a residential mortgage lender to remortgage a commercial property.

The differences don’t stop there. Commercial lenders will require information regarding your premises, which can include:

  • The rateable value of the property
  • Lease arrangements (if rented out)
  • Insurances on the building
  • Energy performance certificate rating (EPC rating)
  • Registered use (mixed-use, semi-commercial)
  • Commercial class

Depending on the nature of your premises, certain lenders may require further information for a remortgage.

If your property is leased to a business, your lender will require a copy of the lease. This is to ensure that the lease provides you with some cover and doesn’t leave you or your lender in a vulnerable position.

How does a commercial remortgage work?

In terms of how the process works, your new lender will replace your existing lender. This part of the remortgage is very much similar to a regular remortgage.

You’ll also require equity in your commercial property. For instance, most lenders will require at least 25% equity to remain in your property at the time of your remortgage. Trying to remortgage at an 80% loan to value for a commercial property will be very difficult.

ask a mortgage broker

Can I borrow more against my commercial property?

Yes, it’s possible to release equity by borrowing more against your commercial property.

The amount you’ll be able to borrow will depend on the amount of equity you have in your property. Furthermore, the value of your commercial premises will also be a factor in the amount of equity you can release.

How much can I borrow?

Many lenders have a minimum remortgage amount of £25,000 with a maximum loan amount of £25m. That being said, amounts will vary from lender to lender.

If you’re planning on a large commercial development that exceeds £10m, development finance may be better suited.

Learn more about development finance here.

Should I remortgage a commercial property?

A remortgage isn’t always the best option. For instance, you may already have a great mortgage rate, or you may have to pay an early repayment charge (ERC). That being said, you’ll be able to calculate whether a remortgage makes financial sense, by assessing what other lenders are prepared to offer you. Our advisors can also help you with this.

Reasons to refinance a commercial property

Benefits of a commercial remortgage include:

  • Switch to a lower interest rate
  • Reduce the term of your mortgage
  • Release equity for further investment
  • Improve cash flow
  • Extend your premises
  • Leverage your commercial assets
  • Review your investment goals

Can I switch from an owner-occupier mortgage to a commercial buy to let?

If you run a business from your commercial property but now want to rent it out, you’ll have to switch your mortgage type. For instance, your current mortgage will be an owner-occupied commercial mortgage. You can use a remortgage to switch to a commercial buy to let.

Informing your lender that you want to switch mortgage types is important. This is because you’ll need consent from your lender if there are any changes to your original plans.

How to calculate the best remortgage rates

If you’re ready to remortgage a commercial property, you’ll want to establish the most competitive deals you’re eligible for. This is so you can assess whether a remortgage is indeed viable.

You can look at online mortgage rates, but comparing deals from each lender can be a longsome process. Alternatively, you can consult the experience of a commercial advisor, who can compare each deal for you. You can make an enquiry to speak to a specialist. We’ll then assess your options before searching for possible deals.

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About the author

Mortgage Advisor | More Articles

Martin is a senior mortgage advisor and has held a CeMAP qualification for over 15 years while also completing an MBA in Global Banking & Finance.