January 11th, 2017. Luke Egan
Can I Get a Commercial Mortgage with Bad Credit?
Starting a new venture with minimal funds and a poor credit rating could appear as a long shot to many. Some people may not even bother applying for finance, for fear of being rejected. But, that may not be the case.
Can you get a commercial mortgage with bad credit? If you’re looking for a simple, one-word answer it would be: yes.
There is commercial finance available for people with bad credit. However, having a bad credit rating can make it much more difficult to acquire a loan and you may have to find specialist bad credit commercial mortgage lenders. Here’s everything you need to know:
Bad Credit, Doesn’t Mean No Credit
Traditionally, bad credit industry brokers and lenders weren’t viewed as the most ethical of organisations, but over the years this stereotype has changed. With stricter regulations on the industry, many of the ‘car salesman’ types with ridiculously high rates have moved on.
Now, the majority that position themselves in this sector work tirelessly to find the correct finance for every individual, and in many cases can help improve a client’s situation by reducing their monthly costs.
It may sound a bit peculiar, but by taking out a bad credit loan at a higher rate and ensuring that you meet the repayments you can actually work to improve your credit score. After a year or two of making regular repayments, you may be able to re-mortgage on a standard rate and therefore save yourself money on the interest. This can help you to overcome your patchy credit history and get back on track in the easiest way possible.
Enlisting the services of a friendly broker to find such funding doesn’t have to cost an arm and a leg either. A commercial proposal can be put together relatively quickly which highlights the positives and negatives of each case. In some cases, finance can be secured less than 48 hours from application.
We’ve found that traditionally lenders would have a blinkered approach and if a client did not fit the lending parameters exactly, a deal would not be made. However, in our experience, lenders are now more willing to take a view on situations and are more likely to be flexible with their lending criteria. This is great news for businesses or individuals who may have been on the borderline previously.
Despite this, there are a number of things to bear in mind when seeking a commercial mortgage with bad credit.
Things to Consider Before You Take Action
Expect Higher Rates
Due to your bad credit, you will be considered more of a risk to lenders and therefore they are likely to charge you a higher rate or limit the amount you can borrow. This is done so that they can recoup their losses if you default on the loan.
Depending on how bad your credit history is, you may need to seek out lenders who specifically deal with poor credit customers. Using these lenders will increase the chance of you being granted a loan and through careful research (and by using a commercial mortgage broker) you can even get more reasonable rates.
Finding Lenders Can Be Hard
One of the biggest problems you’re likely to face is finding lenders who provide bad credit commercial mortgages, as despite offering them they tend to not advertise them. This can make it very hard to compare mortgage rates side by side or figure out which loan would suit your needs the best. Many people turn to a commercial mortgage broker at this point in order to gather all the information they need about lenders and their products.
Ensuring You Can Make Payments
The worst thing you can do at this stage is to take out a mortgage with no certain way of meeting the repayment. Defaulting on a large loan like a commercial mortgage will seriously harm your credit rating and will almost undoubtedly cut you off from any future loans from that lender. Before signing anything be sure that you are able to manage the repayments even if there is a fluctuation in the interest rates initially offered.
Do You Have Poor Credit?
Find out how we could to help you increase your chances of securing a commercial mortgage with bad credit by contacting our friendly team of experienced commercial mortgage brokers. If you wish to find out more about the services that we provide call us today on 02920 766 565.
Article By Luke Egan
January 11th, 2017
Luke heads up our specialist property finance team where his focus is to drive our transactions valued between £100k and £5m.
Luke and his team manage enquiries from initial enquiry through to redemption. Luke also sits on the internal credit committee with Ben and Tom.
Luke joined Pure back in 2014 following a successful role in the Barclays property finance team that lasted over 8 years.See more articles by Luke