What is a Professional Practice Mortgage?

What is a Professional Practice Mortgage? These commercial mortgages are used for the purchase of premises exclusively used for the purposes of dentistry, a doctors surgery, or other similar professional practice business. Commercial mortgages and loans for buying Practices or Consulting facilities are available for both leasehold and freehold purchased property, and for start-up as well as established businesses.

Status-Based Lending Sources in 2014

It is often perceived that the cheapest loans are obtained through High Street lenders. For this reason, Banks head the list when we consider low cost business finance sources. However, now more than in previous years, there are often strict criteria attached to High Street loan applications, and potentially, subsidiary charges to be considered.

Lending Conditions

Professionals seeking finance for the purchase of new premises, or to extend their existing premises, have the luxury of choosing from a wide variety of commercial mortgage lenders. The low-risk, high income nature of professional practice businesses, mean that these investments are considered to be of relatively low risk by both the specialist and mainstream lender communities. Why Seek Professional Assistance? Whilst professionals have the luxury of choice, the volume of options available bring different challenges.

Some key elements to consider when looking for a professional practice mortgage lender concern:
Professional experience & track-record
Interest rates and costs
Willingness of lenders to lend to your type of practice
Required securitisation
Available capital for the deposit
Availability of supporting information

Status-Based Commercial Mortgages

In the case of High Street Banks a business case will be required to support the mortgage application. As most Banks now make lending decisions via a centralised lending committee, it is important that the supporting documentation includes elements such as:

Business plan
Cash-flow forecasts
Reason for the application
A strong desire to make the practice successful

High street lenders in 2014 usually lend lower loan to value on commercial property, however, in the case of professional practices this is not the case. An applicant could potentially be offered 100% of the value of the property, however, there may be conditions attached that require securities such as a charge over personal assets owned by the company directors.

Non-Status Lenders – Professional certificate in mortgage practice

Non-status lenders look at the bricks and mortar values of the property, and less of supporting business documentation. Consequently they will often require securitisation in the form of a cash investment at the time of purchase. (This is commonly referred to as a deposit, and may equate to 15% of the purchase price). A recommendation toward specialist lenders may be made if the applicant has no supporting documentation/business plans, where the money is required urgently, or where there are no additional securities to satisfy the banks. Specialist non-status lenders are also often quicker in making their lending decisions, and in releasing funds.

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