Category: mortgage info

5 Frequently Asked Questions about Commercial Mortgages

Posted By : at 10.25 am

Is it Wise to take out a Commercial Mortgage?

The benefits of a commercial mortgage are numerous, acquiring your own business premises means the company you run and own will benefit from the increased property price over time and even capital gains whenever you decide to sell the property. So no matter what the property is, factory, warehouse or office it’s at the very minimum worth considering.

A commercial mortgage much more long term thinking, renting a place of work will only allow short to medium term planning as you won’t know by how much the rent could rise at a renewal date in the future. With monthly mortgage payments the amount paid will be stable, (especially if you can gain a tracker rate) over a much longer period of time, fixing costs and allowing foundations in other areas to be set.

Owning your own building also gives you the scope to play the role of landlord yourself. It should be looked at if your current workspace is too large or you have enough room, sublet it to another company or partition the space into several spaces and gain several tenants. This could be a very effective way of covering your own commercial mortgage payments.

What Are The Main Advantages Of A Commercial Mortgage?

You mean besides potential capital gains and income from subletting, then how about tax deductions? Most businesses that pay commercial mortgage can claim tax expense on the payments, meaning tax is reduced on gross annual profits; it doesn’t get much better than leaving the taxman short changed!

Another of the indirect goodies a commercial mortgage delivers is the option to avoid having to sell a stake in your company for capital injection. Using the equity in your commercial mortgage is a self generating way to get the cash you need to expand or pay debt off without chipping away at the control of your company.

As was already mentioned once or twice, commercial mortgages lead a more stable foundation to place your company on, without having to put up with sharp rent increases that could severely damage overheads and profit margins.

Who Is Responsible For The Commercial Mortgage Repayments?

This question all depends on the chain of command within your company, though it will always be with whoever is at the top of the pyramid. Partners in a business will be jointly responsible for any commercial mortgage, while a sole trader will have the entire burden to deal with.

Responsibility is much different in a company structure with numerous director’s, each will have to agree to give a ‘director’s guarantee’. With this guarantee, each director pledges to take personal responsibility for the loan to the lender, this is necessary with almost all lenders now.

How Much and Over What Term Can I Borrow?

The maximum term for almost all commercial mortgages is around 20 years, though for older buildings you might only be able to secure a 15 year term at best. Though rarer than they use to be, interest only mortgages are available, but they will almost certainly include the caveat that they revert to a capital mortgage after a certain number of years. This is partly to help get the business firmly up and running without overloading the business with a crushing overhead straight away.

The lower the Loan to Value (LTV) rate, the better the chance of a commercial mortgage being approved. So the more you can put up front in the deposit the better your chances, for commercial mortgages, the minimum deposit will average somewhere between 20-30%, with 20% being the absolute minimum, higher than for a residential property and mortgage. Having a larger deposit also results in lower interest rates on the mortgage, saving thousands of pounds in the long term for your business.

Just Remortgages is the leading site in the UK for the latest remortgage
rates, and best remortgage deals available in the market.

Categories : mortgage info

The Window Is Fast Closing On Remortgage Options As Interest Rate Rise Draw Closer

Posted By : at 04.50 am

Inflation is currently at 4%, so it’s inevitable that the Monetary Policy Committee are going to increase interest rates in the very near future. So is it time to go for that remortgage you’ve been after?

Interest rates have been at their record low of 0.5 per cent since March 2009. However, faced with these recent inflation figures, it seems inevitable that the Bank of England will have to raise interest rates in the next three months. Whilst there is yet to be a consensus on the Bank’s Monetary Policy Committee (MPC) it seems only a matter of time before rates rise.

It is reported that interest rates will see an increase by approximately 0.75% around the end of this year, and while although this is still low compared with historical interest rates, borrowers who took on fixed rates of over 5% before the interest rates were decreased will still be very jealous of the new rates on offer. But will interest rates continue to rise or will they come back to our current low? One thing to understand is that inflation in the UK isn’t currently being caused by the spending in the UK at all, so increased interest rates won’t affect inflation at all in this country. So could this be an opportunity for the Monetary Committee to pay about with rates?

In a nutshell the answer is no. The monetary committee commonly stick to a plan, either to increase slowly and see the effects over time of decrease and do the same. They won’t (from historic experience) put it up then down and continue like a rollercoaster. This does the economy no good. The general consensus is that people are saving again and to encourage it, a slow increase in interest rates will keep them interested in saving which will help our economy to recover. So it is very likely that we’ll see increases continue over the next few years.

As you may or may not know, once the Bank of England sets the base interest rate the banks tend to follow, which means an increase in the base interest rate will result in an increase in mortgage interest rates too. With that in mind, now is the time to get a new deal before the interest rates on mortgage deals increase, which they will. And it’s already happening and some of the low cost fixed rate mortgages are being withdrawn.

As interest rates rise, lenders may be less inclined to offer fixed rate products. The problem may also be exacerbated if a trend of rising rates is established as lenders may hold out for greater returns at a later date.

When lenders expect interest rates to rise, it also has a knock-on effect on swap rates – the rates at which banks lend to each other. With swap rates rising in expectation of rate increases, it means that fixed rate mortgage products become more expensive. Fixed rates can also become scarcer as lenders regularly have to withdraw deals in response to rising funding costs.

Lenders are starting to announce their right to withdraw mortgage products without notice and this has been seen recently with some of the majors axing fixed rate deals. This included a two year 3.09% fixed rate deal, a five year 4.49% fixed and a ten year deal offered by one of the UK’s biggest lenders.

New mortgage deals will replace old ones, so don’t worry – all is not lost. It just means that new deals will be issued and the rates will generally be slightly higher than the old ones. As a rule mortgage rates (for fixed rate contracts) are usually around 2-5% above the Bank of England base rate depending on the bank and the particular deal that you opt for.

Taking these factors into account, now may be a great time to consider a remortgage. If you are looking for a fixed rate, the price of these deals may well only increase over the next few months and years.

Timothy Frodsham writes for Just Commercial Mortgages.com the UK’s No.1 site for the latest commercial mortgage rates and commercial property finance news.

Categories : mortgage info

Remortgage Protection is Essential, Make Sure You’re Not Missold a Mortgage

Posted By : at 01.07 pm

The Financial Services Authority (FSA) who are responsible for regulating all of financial services including mortgages has fined one of the well known lenders after discovery of their mis-selling.

The lender, who are part of Deutsche Bank were fined just under a million pounds by the FSA. The reason? That old story of mis-selling. The FSA ruled that the mortgage lender had been irresponsible in their lending practices and had also been unfair with charges that they had made to customers who had fallen behind on payments.

Such action has never been taken against a mortgage lender in Greta Britain before, and it comes as welcome news to anyone looking for a new mortgage. This case now forces lenders to be more responsible with their lending. Since the market crash of recent years, we have seen many mortgage with 100% loan to value or higher disappearing, however this new decision by the FSA means that lenders will actually be fined if they allow such mortgages to be processed as the mortgagee goes straight into negative equity from day one which is not responsible lending and goes against the FSA’s ‘treating customers fairly’ rule.

To avoid court action and the potential of significant financial penalties, lenders will now have to ensure that they lend responsibly. For example, they will have to ensure that borrowers are not being encouraged to borrow higher loans than they can afford. In addition, they will have to take great care over home loans that continue into a borrower’s retirement.

In another ruling that is likely to benefit borrowers, DB Mortgages were forced to repay fees and charges where the amount charged did not accurately reflect the administration work involved. This successful challenge mirrors the claims against High Street banks for the level of charges being applied to current accounts.

This ruling is likely to fundamentally change the landscape of the mortgage industry. The Financial Services Authority (FSA) was keen to point out to the City that it would no longer tolerate poor lending practices of this kind in future. The level of fines and charges refunds also sent a strong message to lenders that they would have to tighten their mortgage practices.

From a borrower’s perspective this looks like great news as this gives them even more protection. Obviously the best protection is to try an avoid problems at the start by asking the correct questions. The FSA is a body can only work retrospectively, after the horse has bolted and after the stress and heartache that a mis-sold financial product can cause.

Always ensure that you fully understand any mortgage that you sign up for and that you know exactly what charges will be applicable. Fees vary significantly from lender to lender and you cannot assume that they are all the same.

Doing adequate research can only help when remortgaging, for such a big decision there is no such thing as being over prepared. Google the company and the remortgage product with the words ‘nightmare’ ‘headache’ and ‘charges’ and see what comes up. There is also a moral responsibility on your side to be honest with the lender and to ensure the lender has taken all reasonable steps to fully understand your circumstances and your ability to pay.

If you think you may have been mis-sold your mortgage in the past few years, it would be a good time to sort it out now while it’s a hot topic and claim back any charges.

Timothy Frodsham writes for Just Commercial Mortgages.com the UK’s No.1 site for the latest commercial mortgage rates and commercial property finance news.

Categories : mortgage info

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