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Property finance explained

What is Property Finance?

When you think of property finance, you probably think of commercial mortgages, but in reality property finance includes a range of facilities that enable organisations to purchase, refinance, or develop a commercial property.

This might include office buildings, retail space, industrial warehouses, restaurants, or other types of commercial space.

Here we explore the key points to be aware of when considering property finance as well as how to apply with Bluestone.

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Commercial vs personal mortgages

Commercial vs Personal Mortgages

A commercial mortgage operates similarly to a residential mortgage, but with some key differences. For example:

Purpose: Commercial mortgages are used to purchase or refinance commercial property, such as office buildings, retail space, or industrial warehouses, while personal mortgages are used to purchase or refinance a residential property, such as a house or an apartment.
Borrower: Commercial mortgages are taken out by organisations, while personal mortgages are taken out by individuals.
Loan amount: Commercial mortgages typically have higher loan amounts, as they are used to purchase or refinance much larger and more expensive properties than personal mortgages.
Interest rates: Commercial mortgages generally have higher interest rates than personal mortgages, as they are considered to be a higher risk for the lender.
Down payment: Commercial mortgages often require a larger down payment.

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The types of property finance

The different types of commercial property finance

There are several different types of commercial mortgages available in the UK, including:

Fixed-rate mortgages: A fixed-rate mortgage has an interest rate that remains the same for the entire term of the loan. This type of mortgage is suitable for organisations that want stability and predictability in their monthly payments.
Variable-rate mortgages: A variable-rate mortgage has an interest rate that can fluctuate over time, based on changes in the market. This type of mortgage is suitable for organisations that can handle the risk of higher monthly payments and want to take advantage of potentially lower interest rates.
Capital and repayment mortgages: A capital and repayment mortgage involves paying off the interest and a portion of the principal each month so that the loan is fully repaid at the end of the term.
Interest-only mortgages: An interest-only mortgage involves paying only the interest on the loan each month, with no payments towards the principal. This type of mortgage is typically used by businesses that plan to sell the property or refinance the loan before the end of the term.
Bridging loans: A bridging loan is a short-term loan used to purchase or refinance commercial property when more conventional financing is not available. This type of loan can be used when a business is waiting for the sale of its current property or for more permanent financing to become available.
Development finance: Development finance is a type of loan used to fund the construction or renovation of commercial properties. This type of loan is suitable for organisations that are developing new properties or improving existing ones.

The type of commercial mortgage that is best for a particular organisation will depend on its specific needs and financial circumstances.

The next steps

Applying for property finance

If you're interested in commercial mortgages in the UK, we can offer bespoke lending solutions to meet your specific needs.

Our knowledgeable and experienced team will work with you every step of the way to ensure that you get the right mortgage for your needs.

With a commitment to transparency, flexibility, and excellent customer service, Bluestone is the ideal choice for organisations seeking a reliable commercial mortgage provider.

‍Contact us today to learn more about how we can help you achieve your business goals.

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What to do next...

How we can support you with property finance

At Bluestone, we understand that applying for commercial property finance can be a daunting process, especially if you're unfamiliar with the requirements and criteria. That's why we're here to support you every step of the way.

Our team of finance experts have years of experience helping organisations secure the funding they need to cover their financial obligations. We'll work closely with you to understand your specific requirements and provide you with a range of financing options tailored to your needs.

Looking for property finance?

Contact us today to apply with Bluestone.

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Commercial Mortgages

Frequently Asked Questions

Can you explain the concept of a commercial mortgage and how it works for financing in the UK?

A commercial mortgage is a type of loan that is secured against a property or other asset. It enables organisations to borrow money to purchase or refinance commercial property. The property acts as collateral for the loan, and the lender uses the rental income generated by the property to repay the mortgage.

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How does a commercial mortgage benefit my organisation, and what advantages does it offer compared to other financing options?

A commercial mortgage can offer a number of benefits to your organisation, including lower interest rates compared to other forms of financing, longer repayment periods, and the potential for increased tax efficiency. Additionally, owning the property that your organisation operates from can provide you with greater stability and security.

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What types of assets are eligible for financing through a commercial mortgage, and what are the requirements for approval?

Commercial mortgages can be used to finance a wide range of commercial property types, including offices, warehouses, retail units, and more. To be eligible for a commercial mortgage, your organisation will typically need to have a strong financial profile, including a good credit rating, a solid business plan.

What is the typical repayment period for a commercial mortgage, and how does it impact my cash flow and financial statements?

The repayment period for a commercial mortgage can range from 5 to 25 years, depending on the terms of the loan and the lender's requirements. The repayment schedule will typically include both capital and interest repayments, and these payments will impact your organisation's cash flow and financial statements. However, owning the property outright at the end of the loan period can provide long-term benefits for your organisation.

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Are there any penalties or charges associated with early repayment of a commercial mortgage, and can you provide guidance on how to handle these if needed?

Some lenders may charge an early repayment fee if you choose to pay off your commercial mortgage ahead of schedule. This fee can range from a few hundred to several thousand pounds, depending on the terms of the loan.

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