No mortgage broker is ever going to know about every type of mortgage available and most people feel out of their depth when faced with a client asking for something that may crop up only two or three times a year. Commercial mortgages fall into this category for 90% of brokers in the UK, but this doesn’t mean you have to turn them away.
Fortunately you don’t need to be able to put a case together, you just need to be able to recognise the opportunity and know where to go for help. After all, the more knowledge you have the more solutions you can provide to your clients.
There are a few growing reasons that people could come to you for help:
Owner-occupier commercial mortgages
With interest rates and investment returns so low, it is becoming increasingly common for businesses that are currently renting their premises to look to purchase. This type of transaction is growing in popularity and it can be a good way for business owners to invest and reap the rewards of increasing property values.
In general a deposit of 30% plus is required, but commercial loans are available with deposits as low as 20% if you know where to look. With rates from 3% over base, repayments from 15 to 25 years and lender’s fees typically at 1.5% this can be a long term investment that beats renting.
Many brokers will already have business owners as clients who have completed residential mortgages, but they may also make good referrals for commercial mortgages or even specialist, secured or unsecured business lending.
Commercial, mixed-use or specialist residential lending
It is common to have repeat clients taking buy-to-let mortgages, but there are a growing number of investors looking at properties outside of standard, residential buy-to-let. These clients may want mortgages on shops with residential upper floors; stand-alone commercial units or require specialist residential mortgages such as those required for HMOs (house in multiple occupation). Some may even be after multi-unit freehold blocks or student accommodation.
These are all situations where specialist commercial lending can provide the answer, but it comes down to having access to the right specialist knowledge and knowing which solution is right for each client. Working with the right people is one way to ensure you have all the information to guide a client; it really doesn’t have to be difficult you just have to use the right resources.
Commercial finance is a many facetted sector within the market, but it is also one that could add to your client base and your income. The trick is that you don’t have to learn the complete process, simply be able to spot the opportunity and to use all the expert help available, from those that do know, to enhance your business proposition. It is not rocket science, but it is interesting.
Robert Collins is director of commercial finance at Brightstar