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Are 100% LTV Commercial Mortgages Still Obtainable?

At first glance commercial mortgages and residential home loans appear to be similar, however there are some fundamental differences between the two, normally when the issue of ‘loan to value’ is raised. Loan to value ratios are an indicator of the levels of risk the bank or lender is willing to undertake when lending o a commercial enterprise. Typically they will lend only 75 per cent of the total value of the mortgage and the borrower will have to produce a 25 per cent deposit.

There are however ways to circumvent the need for a 25% deposit on a commercial mortgage, recession or not, 25% deposit can be too much of an ask for most people, so we’ve compiled a list of ways which might help convince commercial lenders to ease the restrictions, so without further ado…

Additional Security Lenders like to minimise their risk when agreeing commercial mortgages. So, a way to help your chances of obtaining a high ‘loan to value’ is to offer some additional security for the mortgage. In many cases, the commercial property will simply be the property that you are looking to buy.

However, you could offer the lender the additional security of another property. For example, if you own other commercial properties or a residential property, the commercial lender could place a legal charge against one of these other assets in order that they benefit from additional security for the lending.

Increasing The Mortgage Term: Another method of increasing the commercial mortgage amount is to take the borrowing out over a longer term. By taking the commercial loan over a greater number of years, you will reduce your monthly repayments. The longer the term of the loan; the lower your monthly repayments will be and this makes the loan more affordable to you.

Tenant Purchase: In some instances it is possible to purchase a freehold at a discount if you are the sitting tenant in a commercial property. In essence this simply means that the landlord will offer you a deal in order to quickly complete the sale and not have to find a new customer. If you can capitalise out of your landlord’s need to sell and for it to be a simple process, then you should certainly consider this opportunity.

Depending on the size of the discount, your commercial lender may offer you 100% of the purchase price as this only represents a lower percentage of the actual value of the property. If the surveyor confirms that the property is in a popular location and will sell easily, the lender may be even more inclined to allow you to borrow against the valuation rather than the purchase price.

Value Added: If there is the possibility that you can reconfigure the site, or extend or renovate the commercial property, a lender may consider a higher mortgage. This is true if you plan to add value to the property through the improvements and that these renovations will attract a higher class of tenant.

Anyone who has watched Property Ladder on Channel Four should be aware from the outset that it is essential in this instance to do ample research. Make sure that what you are going to do to a property will actually add value to it. Make sure that you get the property surveyed and valued for sale price and rental value. The last thing you or the bank wants is to find out that their loan has been a waste of money.

As you can no doubt see, there are numerous ways you can bend the system to obtain a 100% commercial mortgage. It might take time and a lot of patience of perseverance at first, but you will eventually find a commercial mortgage that you are looking for.

Howard O’Gollegos writes for Just Commercial Mortgages the UK’s No1 site for the latest commercial mortgage rates and commercial property finance news.

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