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Buy To Let Commercial Mortgage – A Growing Opportunity
In the not so distant past the term “buy to let commercial mortgage” would have been synonymous with “residential commercial mortgage”. This is because many lenders and brokers regarded buy to let mortgages as commercial propositions.
Many property investors now consider a good mix of residential and commercial property to be a requirement of a well managed portfolio. This change in demand has forced the market to adapt, buy to let commercial mortgages are now one of the fastest areas of commercial lending.
When considering the range of commercial investment property, the main types of buy to let commercial mortgage products can be defined generally under the headings ‘blue chip’, ‘premium’, ’secondary’ and ’speculative’.
The highest quality of investment property would be the “blue chip” investment. These properties will have very good quality tenants on a long lease, as well as occupying the best location. Because of the stability of the tenant these properties become very attractive to the institutional investors, resulting in slightly inflated values. These higher values can put pressure on the buy to let commercial mortgage by reducing yields.
Premium investments would typically be very similar to blue chips, with perhaps the exception of the quality of the tenant. Instead of a well established business, such as a national chain or franchise, the tenant would still expected to be of high standing. Because the values of these properties are more realistic they can offer more attractive rental yields, resulting in more interest from smaller investors.
When examining ‘Premium’ buy to let commercial mortgages lenders will question the experience and financial standing of the investor. The lender will ask can the borrowing costs still be paid in the event of the tenant defaulting? this is particularly important and the valuer may well be asked to comment on the likelihood or otherwise of finding good tenants quickly and easily. Due to this potential for risk, a lender will also be interested in verifying the stability and reliability of the tenant(s).
Not surprisingly, speculative investments are the hardest to fund. Very often the property is not pre-let, may be in need of repair or refurbishment and may not even be in a good location. For these reasons a lender will expect the borrower to have the means to support the buy to let commercial mortgage from Day One – and evidence of this will usually be required.
High street banks and building societies are most likely to favor the blue chip or premium propositions, They usually reward solid investment opportunities will very low interest rates and terms.
Commercial buy to let investors seeking funding for the secondary type of properties have historically struggled to find funding at sensible rates, the challenge was being able offset the renal income against the higher interest rates from the banks. Competition in this sector is bringing rates down though.
Speculative investments continue to be a specialist area, and unsurprisingly there are still few lenders prepared to back these deals unless they are confident of the borrowers ability.
Buy to let commercial mortgages are helping a new breed of property entrepreneur seize opportunities. Obviously caution still needs to be exercised when assessing the profitability of any commercial property investment.
About the Author
When searching for a
buy to let commercial mortgage
it is vital to talk to someone with experience in dealing with the full range of commercial property types. Spectrum Business Finance have been arranging commercial finance for over 5 years and have the experience to help in almost all circumstances.
mortgage valuer Questions
We are selling our first house, what is the process for moving?…?
We have 2 valuers coming on Friday to value the house and then we’ll decide who we want to go with. What do we do after that, can we put the house up for sale that day? Do we then have to find a solicitor that day? I have arranged to go and see a house that I’ve fallen in love with on Saturday, but if we want to make an offer can we do it that early given that we won’t of sold ours yet? and would we have the right to ask them to take theirs off the market if they accept our offer? One lady said I wouldn’t make an offer till we’d sold ours unless we want to pay 2 mortgages but I don’t think a chain works like that does it. They might not have even found a house they want either. I’m just a bit unsure of it all as I’ve never sold a house before. If someone could give me some guidance I’d really appreciate it. I live in the UK, so only UK info please. Thanks.
Don’t take the highest valuation they’re just after your business, take the average. Don’t forget H.I.P.S. that will cost about £350, the search part of it has to be renewed every three months, cost £70/ £100. the whole thing only lasts a year, then all needs renewing. If you get H.I.P.S via an estate agent because you don’t have that sort of money, then you are practically tied to that agent even if they don’t perform, unless you come up with the money to pay them off. The whole system is unfair towards the seller as the buyer doesn’t now need to make any commitment, and as in my case I have sold my house three times only for them to make a drastically reduced offer months later costing me hundreds in solicitors fees. The government are totally out of touch. the Scottish system should be adopted, or at the very least the H.I.P.S package should last until the house is sold as anyone selling isn’t likely to change anything whilst in the selling process.
What is the best mortgage for councils The Right To Buy ?
We are going in for buying my Mums council house and building an extension on the side (so basically she will carry on living in the house and we will build an extension on the side of it for us to live in) We are now waiting for the valuer to come and value the property (the person from the right to buy department came out today and estimated it between 65k and 85k thats including our 26k discount) we will need 30k for the extension, so lets say we need to borrow 100% mortgage on £115,000 where is the best place to go and what type of mortgage is good to go for, fixed rate, variable???? Any help greatly appriciated ….. Tess
If the property gets valued at 85k then that is the amount you could get on a 100% mortgage as they wont lend over the valuation of he property, depending on the lender you should be able to get an unsecured loan for the rest. I know that Nothern Rock do a deal where you can borrow 95% of the value of the property and about £25,000 (i think) max as an unsecured loan. I would recommend that you speak to an independent mortgage broker who can offer advice and search a panel of lenders for you to see what deals are available to you (depending on your credit rating, income, etc), a reputable broker will not charge for this service.
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