Commercial and Semi Commercial Mortgages

A commercial mortgage is a mortgage where the security offered is commercial in nature rather than residential.

For example, a commercial mortgage could be secured against a shop, office, hotel, cinema, pub, business park, garden centre, petrol station, religious building etc. It can also be used to secure against a semi-commercial asset also known as ‘mixed use’ i.e. any combination of commercial and residential such as a shop with a flat directly above it.

There are two main types of Commercial mortgages:

• Trading – also known as ‘owner occupied’. This is where a business owns the property it trades from e.g. a retail store, industrial unit etc. Their ability to meet the mortgage payments is assessed against their pre-tax profits or their EBITDA (Earnings before interest, taxes, depreciation and amortisation)
• Investment – where a property is let under a commercial lease to a third party in exchange for a rental income. In this instance the property owner is the landlord.

A commercial mortgage can be structure in the same manner as a residential mortgage but there will be various considerations to investigate prior to submitting an application.