Retail Property Mortgage is a loan to be used specifically for the purchase of a standalone retail unit, or other commercial premises used for conducting retail trade. In order to qualify for retail property finance the retail portion of the property must be greater than 40% of the total floor space. If the retail element is less than 40%, for example, by having rentable flats above the shop, the commercial mortgage application should be aimed at achieving an investment property mortgage, which has different qualification criteria.
Retail Mortgage Lending Conditions
Most commercial mortgage lenders will lend against retail property, and this position is unlikely to change significantly in coming months. The qualification criteria differs significantly between the High Street and specialist lenders. Mortgages for fast-food outlets, shops and other retail businesses are available from both High Street and specialist lenders. Applications will be considered and usually granted from businesses with good or bad credit histories, mature businesses with strong accounts, or start-up businesses with no accounts. The commercial mortgage broker will help to determine the best lending source for your business based on your unique situation. Options are also available for mortgages on leasehold retail premises, although the length of the lease (years) at the end of the period of the loan, is often a major determining factor in whether a mortgage offer will be forthcoming.
Retail Mortgage Products and Retail Property Loan Rates.
Self-Cert Retail Property Mortgages – Mortgage Criteria:
To 85% LTV
LIBOR and Bank of England rate options
Mandatory property valuation
Simplified paperwork and process
Budgetary Self-Cert Mortgage Rates: Around 2% above base with accounts, true self-cert more like 4% over base with reasonable credit history, and 6% over base if you have CCJ’s or a satisfied Bankruptcy on your credit file.
Note: Discharged Bankruptcies
If you have a satisfied Bankruptcy stamp on your credit file we strongly recommend that you request a Certificate of Satisfaction before you apply for a new retail mortgage. The process is very easy. Simply apply to the Court who issued the Bankruptcy and pay the small charge. The process takes 4 weeks to complete, but most lenders won’t lend you money without seeing this document!
Status-Based Retail Property Mortgages
The lending criteria for status based mortgages is often quite rigid, although there is some level of flexibility for larger purchases (chains etc), or where the applicant has a strong track record in a retail business.
Typical maximum 80% LTV
Require Valuations (property and business)
Business Plans and accounts will be required
Additional security may be required
Additional options exist to build structured finance for shop refurbishment projects, or special situations.
Budgetary High Street Mortgage Rates: Rates amongst the Banks vary for retail mortgages, but start at around 1%-1.5% over Bank of England Base Rate. Costs can scale up to around 6% over Base depending on the perceived risk of the venture, and the credit score of the applicants.