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Rules for recommending commercial mortgages

This article is part of
Guide to Commercial Mortgages

Unlike the residential mortgage market, Rob Lankey, managing director of commercial mortgages at Aldermore Bank, says most commercial mortgages are not regulated.

However, if 40 per cent or more of the property proposed as security for the mortgage is also the borrower’s home, for example a flat above a retail shop, Mr Lankey says the mortgage is regulated.

But Steve Olejnik, sales director of Sevenoaks-based intermediary Mortgages for Business, says there is a high standard of self-regulation in the commercial mortgage industry with lenders generally only accepting introductions from members of the National Association of Commercial Finance Brokers.

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“Commercial mortgage brokers should look to join the NACFB or align themselves with a member. NACFB members operate to a strict code of conduct with all advisers expected to take the IFS Certificate in Commercial Banking.

“A small minority of commercial mortgages may be secured by the borrowers own home and as such are transactions regulated by the FCA. If 40 per cent or more of the mortgaged business premises is used as the borrower’s main residence then again, FCA regulation will apply.”

Adam Tyler, chief executive of the National Association of Commercial Finance Brokers (NACFB), says: “Complete knowledge of a now complicated market place can only ensure the customer gets the right advice.

“Anybody who does not work regularly on this sector is far better off working with a commercial finance broker on an introductory fee basis, as the requirements will vary from lender to lender.”