The commercial mortgage market is characterised by complexities not present in the Residential and Buy to Let markets. The market in general does not feature the dynamic and highly competitive price points seen in the domestic market; however there are increasing numbers of lenders offering tranches of fixed rate money for small and medium sized loans.

Unlike the tick box and simple calculation approach employed in the domestic market to make lending decisions, the commercial market is based around complex pricing models and the verdict of lending panels at each individual institution. Above a certain minimum loan value (normally £500,000), all lenders will go to the money markets and price up a transaction based on a bespoke margin and SWAP rate price (the rate at which banks and building societies lend each other money).

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 75%; with up to 90% available from certain lenders in exceptional circumstances.

The length of a commercial mortgage loan period will tend to be a maximum of 30 years. To work out your own particular monthly mortgage repayments please use the commercial mortgage calculator.

Borrowers should also be aware of the fees in the commercial mortgage market; typically there will a lender fee of 1-2% 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. Furthermore the broker's market knowledge means he is acutely aware of what is achievable for his client given a specific circumstance.

In addition to the above Aberdeen Industrial Finance can deliver a straight forward and simple business mortgage, providing term finance on properties including;

• Farms
• Pubs, restaurants
• Shops, shops with living accommodation
• Hotels, guest houses, holiday lets
• Industrial units, factories, offices, warehouses

For borrowers looking to raise between £50k and £10m, our process is geared towards being simple, quick and flexible. Mortgage products are available with terms up to 30 years, generally up to 85% LTV and have an option for self certification of income. It is important to distinguish that we provide a mortgage product and therefore the advance is made against the market value of the property, excluding goodwill and any fixtures or fittings.

We are able to lend up to 90% of purchase price for sitting tenants purchasing at a discount (subject to this not exceeding any LTV restrictions on valuation) and 100% advances can be made with additional security (either residential or commercial property) from the borrower. The product is available at a margin of between 2% and 5.5% over Libor depending upon the LTV and status of the applicant. Early repayment charges apply.

The product can be used for any purpose by the applicant including;

• New business start-ups
• Business turnaround solutions
• Short Term Finance and debt consolidation
• Working Capital raising
• Property improvement
• Business expansion