The term commercial mortgage applies to any mortgage which is not being used to buy a residential property. Many business owners rely on these types of loans to get started with their first premises, or develop what they have already and expand it. Additionally, property investors can take out a commercial mortgage as a way of financing and developing a number of buy to let properties.
If you’re wondering whether to ask lenders about taking out a commercial mortgage, read on to see the top five ways it could help your business.
Avoid rent increases
When you decide to start a business, you need to decide if you’ll start off renting a space or whether you should buy and own it. While it’s a big commitment to take out a mortgage and buy the business premises, bear in mind that the rent on city offices and shops is forever increasing. If you get the right type of low interest mortgage then you can avoid rent hikes and possibly save money in the long run. Many business owners start out renting and then look to buy a property once they are making a good profit.
Refinance commercial property
This is another way of saving money for your business. Owning commercial property isn’t much different from owning your residential home – you’ll pay monthly payments on the mortgage, plus interest. Different lenders offer different deals, and sometimes you could save by switching to another mortgage provider and refinancing the premises. Bagging a lower interest rate could reduce your monthly payments and free up cash to spend on other areas.
Redevelop or renovate
Commercial mortgages are mainly used to buy business property, but the funds can also be used to redevelop a property. Should you wish to expand your premises or undergo a refurbishment, you’ll need a lot of money upfront. A commercial mortgage can cover these costs and the extra custom you’ll get from the expansion could cover the monthly repayments.
As with any type of property investment, look after it and you should benefit from capital gain over time. If the property increases in value from the time you bought it, this is another business asset. If there was ever a point when you wanted to sell your business or downsize, you could sell the property and earn extra cash.
Pay less tax
The interest payments on commercial mortgages are actually tax deductible. This means that business owners may be able to reduce the amount of tax they pay each year with a commercial mortgage.
Interested in finding out more about commercial mortgages? Get in touch with our business finance experts.