Commercial Mortgage FAQ

Here are all commercial mortgage questions that either relate to the construct of a financial arrangement, or to lender requests for further information, or “deliverables”. The questions are often about “conditions” asked by lenders who have already sanctioned a “Decision in Principle” (DIP), and as such, need to be responded to as soon as possible. Time taken analysing these deliverables can have a significant impact on the speed of the draw-down of monies. Therefore as it may be beneficial for you, our recommendation is, to take the time to read through this page and familiarise yourself with the list of documents that you could be asked to produce. It may save time and therefore money later.
Please note that this is not an exhaustive list, and there may be additional pieces of information that are requested during the process, however, these are the most common issues met when processing clients borrowing requests.

Frequently Asked Commercial Mortgage Questions

What forms of identity will I need to produce?

You will need to produce one form of personal identity – drivers licence (both the paper copy and credit card), or your current passport. In addition, you will need two forms of proof of residence – utility bill, land-line phone bill (not mobile phone bill), council tax bill etc. These documents will need to be confirmed as being yours. To get this confirmation you may be asked to visit either a mortgage broker, lawyer, policeman, councillor, or other worthy who has knowledge of you, to sign on copies of the documents to verify them.

When do I pay for the valuation?

After receiving your DIP, you will need to pay for a valuation of the property. The price of this varies between lenders, but is usually in excess of £1,000.

When do I need to provide a property insurance certificate?

In most cases a lender will want you to provide a copy of your buildings insurance cover just prior to the purchase completing. Some lenders demand that the cover note names them as the first beneficiary.

How can I be affected by a credit search?

Credit searches are the richest source of commercial mortgage questions. The detail in the searches can make lenders stipulate that the client provides full explanations of missed payments in their residential or commercial property history, or company ownerships that are registered in the search results. If you obtain a copy of your credit file in advance of your application (get this from the major credit reference agencies such as Experian) you can avoid surprise commercial mortgage questions.

Why do lenders want to know about the 2nd charge on my deeds?

Lenders will often request details of any 2nd charges on the property should these show up on their credit searches. Often with commercial property, private investors (the owner, family member, external investor, etc) protect cash investments into the company by placing a 2nd charge on the title deeds. Additionally, we have known that previous second charges have been left on the deeds in error after a re-mortgage etc. Second charges will “probably” need to be removed as lenders will, in almost all cases, want to take the first charge over the property.

Why do I need to explain the previous companies in my name that came up in my credit file?

This is not often required unless your name, or a company name, comes up in credit searches associated with a property you are re-mortgaging. Often, the resolution is a very straightforward explanation of your relationship with that trading company, and the reasons why it no longer has an interest in the property.

Why do I need a Bankruptcy Discharge Certificate?

hjgThis only applies to ex-bankrupts, but is a piece of information that can create up to 4 weeks delay in the process of getting the draw-down from the lender. If you have been made bankrupt, and this is now “satisfied” or discharged”, you should apply to the Court for a “Certificate of Discharge”. There is a cost of £60 (as of 2013) for the document, but without it, lenders are breaking the law in lending to you! You should do this as soon as you are discharged, as not having this document may cause you significant inconvenience in later years.

I have a current IVA. Will I still be able to get a commercial mortgage?

If you have IVA’s in place this doesn’t mean that we cannot obtain finance for you. We have lenders who will lend to discharged bankrupts and to those with current IVA’s in place, however, lenders will want a letter from your IVA practitioner confirming that you have been making your payments in accordance with the schedule laid out for you.

Re-Mortgaging Commercial Property?

In the case of a re-mortgage the new lender may have commercial mortgage questions relating to the previous mortgage lender. This information is especially important if:

– The money you are looking to release is for a specific project, and especially if the draw-down is likely to be close to the amount you need.

– The re-mortgage is with the same lender that you are currently with as we may be able to negotiate away your early redemption charges.

Will I need a letter from my accountants to get commercial mortgage?

In many cases, especially for self-cert mortgages, there is a request by the lender for a letter from your accountant supporting the fact that you are able to fund mortgage repayments. The letter asks only very basic questions, and should not be a problem for them to sign, provided that you are able to make the repayments. As with the affordability statement, the accountants letter is packaged with other deliverables and sent on to the lender.

What is a “Letter of Authority to Act”?

This letter authorising a mortgage broker or commercial lender to divulge your personal information in the process of communicating with 3rd parties. With today’s confidentiality laws this is a vital piece of documentation, and one that all brokers and lenders will require in order to deal with your application.