Is a commercial mortgage the right option for you? When deciding whether to buy a commercial property, the rental alternatives can leave you feeling confounded. But, commercial mortgages are about more than just creating a new home for your business.
As a viable investment option, this type of mortgage has a number of advantages you should know about.
Affordable mortgage repayments
A major pull factor when deciding to buy your business premises is the ability to accrue assets. Commercial mortgage repayments are usually similar to rental overheads in the same property, making this prospect even more attractive.
If you’re planning to stay in the same company premises for a number of years, it can make sense to invest your rental overheads into your own assets — rather than your landlord’s.
With a fixed rate mortgage, your monthly repayments could be more predictable than rental rates, too. Compare mortgages with Know Your Money to see the commercial mortgage options available to you.
Reduced interest rates
Commercial mortgages operate along similar lines to residential mortgages, running for between 10 and 25 years. Since commercial mortgages typically have a lower loan-to-value (LTV) percentage, the interest rates are typically lower, too.
What’s more, interest on commercial mortgages is tax-deductible, so has the potential to help your business reduce its annual tax overheads.
Capital gains
When you purchase a property, it is possible to make substantial capital gains. This can be a good way of ensuring capital growth over time, as property prices rarely fall. Business property prices have a tendency to rise sharply, meaning this could be a shrewd investment.
Since commercial mortgages apply to any property which is not your residence, they are a favourite for investors, from buy-to-let landlords to those wanting to purchase land.
Once you’ve made the decision to take out a commercial mortgage, the next big question to ask is: should you own the property personally, or should ownership lie with the business?
Since this will affect important factors such as how much Capital Gains Tax you’ll pay, it’s well worth considering.
Future-proofing your business
Since it’s possible to take out a secured rate mortgage, your overheads could benefit from far greater stability, compared with the fluctuations of the rental market. This can allow for more confident long-term financial planning, so you can focus on the bigger picture.
There’s also great rental potential in your property. Subject to the agreement of your mortgage provider, any extra space can be utilised to generate useful extra revenue.
You have control over alterations and extensions
When you own your own business premises, alterations and renovations are on your own terms. This benefit works both ways, meaning you’re free to invest in the ambitious design your business needs, and landlords can’t force you to produce the funds for steeply-priced annual upkeep.
With power comes responsibility, though, and you’ll need to select profitable and lasting business interiors.
More potential than business loans
Commercial mortgages begin where business loans end. To borrow more than around £25,000, you’ll often need to secure the loan against something, to offset risk to the lender. Owning your own business property means you’ll have valuable assets and can even remortgage your commercial property for the next big project.
Valuable business assets mean you can borrow more without the need to sell a proportion of your shares — keeping you in the driving seat, long term.
