Commercial Mortgage and Development Finance Lenders open for business

Commercial Mortgage and Development Finance Lenders open for business

13:20 PM, 17th March 2012, About 12 years ago 29

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If you are a regular reader of our news and blogs here on Property118 you may have noticed that in the last few days we have added some new badges to the right margin of our website advertising Commercial Mortgages and Development Finance.

When we started we made a pledge never to charge our readers and that’s not changed. If you need help we will endeavour to provide it free of charge. We make our money from advertisers and organisations that employ us for marketing and research purposes. We never pass on data without your permission.

As you may know, my business partner and I founded a commercial finance brokerage in 1990 and retired from that business in 2009. During that time we met with several of the movers and shakers in the banks and niche lending circles and we were founder members of the National Association of Commercial Finance Brokers which reaches it’s 20th Anniversary this year.  We remain very close to the NACFB and regularly network with their members and patrons. We know the right questions to ask to identify whether a project is financeable and we know who to refer you to when you need help. As you can imagine though, having retired from that business three years ago and having pledged to help for free we needed to systemise the process to keep it free.

We did this a while back when we launched our buy to let mortgage sourcing software, which we have also started to advertise more prominently on the website. That’s been very popular as it allows people to input their details and to consider the most popular lenders products, obtain quotes, calculate returns and basically to play around with figures to get a very good understanding of which lenders products are best suited to their requirements and perhaps more importantly, the optimal levels of finance.

The Commercial Mortgage Enquiry Form and the Development Finance Enquiry Form work slightly differently. This is because commercial finance proposals are underwritten individually. It’s not quite as simple as completing boxes and getting a quote. However, there is a standard set of questions we have been able to put together to establish who we should refer enquiries to, so that’s what we have done. This allows us to continue to refer our readers to the right people whilst not having to charge for the service. If anything comes of the deals we may receive a small commission but I’m sure nobody will have a problem with that. Rest assured we will only ever refer you to an NACFB broker who subscribes to an OFT registered Code of Conduct, secures their annual CPD certificate and whose services are backed by Professional Indemnity Insurance.

The bottom line is that we have made it cost effective to continue to provide this service and indeed to make it more widely known that such a service exists. Hopefully it will grow in popularity and create further interest in Property118, which of course is very important to our advertisers and the entire Property118 community. The more people that share their experiences the more we all learn. A famous quote that my very good friend Vanessa Warwick of the Property Tribes Forum often uses (I’m not sure of who first said this) is “we can never learn less” .

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13:44 PM, 17th March 2012, About 12 years ago

"You can never learn less, you can only learn more."
R. Buckminster FullerRead more:

Mark Alexander - Founder of Property118

13:46 PM, 17th March 2012, About 12 years ago

Wow that was quick Samii, you must have read to the end of this blog within seconds of me publishing it.

Jonathan Clarke

17:34 PM, 17th March 2012, About 12 years ago

Hi Mark 
Is the commercial finance designed for individually properties I may wish to refinance or / and will they look at the whole portfolio and take a  view on lending against its total equity strength 
P.s Never learn less? - hmm -  what happens though if you keep forgetting  what you learnt faster than you are able to  learn more - I am getting on a bit now you know 🙂

Mark Alexander - Founder of Property118

17:56 PM, 17th March 2012, About 12 years ago

Jonathan, the wonderful thing about quoting somebody else's famous saying is that you can point the finger back at them and say "his words, not mine" LOL

To answer your question, commercial finance is rarely a viable alternative to a typical buy to let portfolio investor such as yourself, especially if existing mortgages are pre-credit crunch. Rates are typically 2.5% to 5% over LIBOR in the current market, LTV's are conservative at 60% - 75% maximum but the real killer for your typical buy to let landlords is that most commercial mortgage facilities are on a capital repayment basis over a maximum term of 15 years. They can, however, be better for landlords with mixed portfolio's with some commercial and semi commercial properties or very modest LTV's (say 50% or less), especially where they want a facility to simply write a cheque up to a certain amount to buy more properties, no questions asked. Lot's of larger scale investors have these types of facilities to buy at auction, reburb and sell on or to revalue and charge to the commercial lender in order to extend their avaiable credit facilities. Pre 1996 there was no such thing as a buy to let mortgage so for the first 6 years of my career as a Commercial Finance Broker, everything I've described above was the only option I could offer!

Commercial mortgages these days are really designed for occupiers of commercial poperties, i.e offices, shops, care homes, pubs, hotels, factories etc. and indeed landlords who choose to invest into and rent out those types of properties.

Development finance is different again and can range from expensive none status short term bridging facilities against just about any property which has a value through to facilities akin to secured overdrafts for experienced developers of green and brown field sites. The latter are usually reserved for experienced operators and drawdown of funds is typically staged and released based on pre-agreed stages of build as certified by the banks appointed quantity surveyor.

I hope that answers your question but feel free to ask more.

Mary Latham

19:08 PM, 17th March 2012, About 12 years ago

Jonathan Then you have the saying "He has fogotten more than I will ever know" 
I forget to put the wheelie bin out but I never forget legislation - this is known as selective memory I learned this from men hahahahahaha

Sorry Mark for filling the recent comments section with my photograph hahahahaha

Jonathan Clarke

20:14 PM, 17th March 2012, About 12 years ago

Thanks Mark. Thats makes it clear. Never mind. I havent moved into commercial but never say never. I also would like to raise finance  against an unencumbered leasehold studio flat with a small square footage but in short cant through normal BTL residential mortgage companies. Its worth about 75K on a good day but I cant see to extract any money from it.  It would be good security for whoever  at say 60% LTV . Lisa came up with some hope the other day in a post about using it as short term security  on another purchase then add value remortgage and  then pay it back and then recycle the loan facility next time ad infinitum. I would like to raise finance against it once and for all though  even at a relatively high interest rate as i can use the raised finance  to earn much more hopefully. I dont understand the reluctance from commercial or residential loans not wanting to shoulder what i see as a limited risk for them. They would have 30K safety net if they had to repossess and auction off. I live in hope!

Jonathan Clarke

20:21 PM, 17th March 2012, About 12 years ago

Ah yes selective memory - don`t get me started!  Which reminds me I better not forget mothers day tomorrow. Perhaps a bunch of  forgetmenot flowers might be appropriate this year!

Mark Alexander - Founder of Property118

20:23 PM, 17th March 2012, About 12 years ago

That's a very small deal for a commercial lender, they are rerely interested in much under £250,000. I'd say you are probably looking at a private lender or trust for a deal that size and they will be charging similar rates to what banks charge for second hand car finance, i.e. APR's of around 13% to 16%. Is it the size of the flat that's causing the problem for BTL lenders or are there other complications?

Jonathan Clarke

20:55 PM, 17th March 2012, About 12 years ago

Yes its the size plus being a studio. Its only about 20sq metres. Also the low value. I fear it may only value up at say 60000 which cuts out some lenders as at 80% its under their 50K limit. Many dont like studios  and I`m maxed out on the main stream lenders. Its a combination of factors working against me unfortunately

Mark Alexander - Founder of Property118

21:02 PM, 17th March 2012, About 12 years ago

Have you considered talking to your own bank about a secured business overdraft facility? That way the money is there when you need it and you're not paying for it when you don't. It's the closest think you will ever get to a little version of a commercial "hunting licence" facility as Nat West / RBS used to call them.

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