Specialist Lending - May 2017  

Getting commercial mortgages for your clients

  • Grasp what a commercial mortgage is and how it differs from a residential mortgage.
  • Understand the information required to apply for a commercial mortgage.
  • Learn how to match your client with the right commercial mortgage product.
CPD
Approx.30min

The NACFB website confirms: “The lender will also want information about your business and will be looking to see if it is profitable. 

“They may request your business accounts and projections to check that the business has longevity and is not under any immediate financial pressures.”

As most businesses will have a record of accounts and a business plan already drawn up, this should not be too difficult.

Asking the right questions

The Association also warns of certain restrictions, explaining, “some lenders may impose restrictions on the property, such as the ability to sub-let to other businesses, so you should seek professional advice from your solicitor, and if required, a chartered surveyor”.

Equally, commercial mortgage applicants should consider how to choose the right lender for them.

It is simply no use approaching a lender or arranging a meeting with a mortgage provider unless the applicant understands the criteria they require to agree the loan.

So what kind of questions should an applicant ask a potential lender?

Mr Tillcock says the key areas are:

  • Is the property type acceptable to the lender? 
  • Does the loan amount fit within their lending policy?
  • Are directors’/applicants’ ages acceptable to the lender?

Affordability is key for both the lender and the customer, particularly following the introduction of the Mortgage Credit Directive (MCD) last March.

He says this has placed greater emphasis on affordability by lenders, adding “while the MCD focuses on residential lending the obvious impact on lenders to make sure borrowing is affordable will inevitably impact on commercial lending decisions”.

Mr Hallett emphasises at Metro Bank all commercial mortgage cases are assessed and individually underwritten, taking into account peoples’ experience, credit worthiness and ability to honour commitments.

Call for change

Joshua Gerstler, financial adviser at The Orchard Practice, explains advisers with clients who want to apply for a commercial mortgage can go direct to lenders via a master broker, or they can introduce their clients directly to the lender.

“I like to go direct where possible as I find that whenever I bring in another intermediary, somewhere along the lines, something gets lost in translation as it is not as smooth a process as when I do it myself,” he suggests. 

“However, sometimes another intermediary will have a relationship with a lender that I do not and be able to facilitate a deal with them that I would not have access to.”

But Mr Gerstler believes the commercial mortgage market is “ripe for a shake up”.

He asserts: “The commercial mortgage market is very different from the residential/BTL mortgage market. The majority of residential/BTL lenders have good people and systems in place to process applications.”

He suggests this is lacking among the majority of commercial lenders, however.

“Everything appears to be very much dependent on getting the right person at the lender to take ownership of your application, and want to see it through to completion. In theory, getting a commercial mortgage should be as simple as getting a residential mortgage, but it does not feel like it at times,” says Mr Gerstler.