July 12th, 2013. Ben Lloyd
The Advantages of Commercial Mortgages and Property Ownership
Commercial property ownership has many advantages over renting a property such as an office, shop or factory, yet many business owners still prefer to go for the latter option.
Read on to find out how you and your business could benefit from a commercial mortgage and the advantages they have over other finance options.
You retain complete ownership of your business and premises
The last thing you want when starting your dream business or expanding the one you already have is to have to sign over a percentage of your business in order to secure finance for your premises, but this is exactly what some types of commercial finance lender expect. Commercial mortgage lenders never ask for such collateral though and are paid the interest on the mortgage loan and nothing more.
You won’t be out of pocket when compared to rental payments
You’ll find that the mortgage payments on a commercial property cost around the same as the rental payments would, and often less, but by choosing the mortgage option you end up owning the building at the end of the term. Also, the only way the payments on a mortgage will increase is if the interest rates go up, but when it comes to rental prices, these can often be increased as the landlord of the property sees fit. Interest rates can come back down but rental prices very rarely fall once they have increased.
There is potential for capital gains
Property prices are continually rising, and especially in developing areas. Buying a commercial property is a great form of investment providing you do your research and buy in the right area. Buy wisely and you could see a significant increase in value in just a few years, with gains often outstripping those of residential property and overseas investments.
You’ll benefit from lower interest rates than other forms of finance
Commercial mortgages, just like residential mortgages, tend to have much lower interest rates than other popular forms of finance, such as unsecured loans. You also have the option of paying your loan back over a longer period of time and fixing the payments so you know exactly where you are each month in terms of the amount needed.
Commercial mortgage payments are tax deductible
The payments you make to your mortgage lender are tax deductible, meaning you save money year on year. Also, any net proceeds from your loan are considered non-taxable income, again putting money in your pocket and not that of the tax man.
Commercial mortgages are easier to end than leases
Should the worst happen and your business fails or should the dream work out and you find you need to move to bigger premises, a commercial mortgage can easily be ended. If you’re upgrading you can often move your mortgage to your new property but if you’re closing your business you can sell the property and pay off the outstanding mortgage. Alternatively, you could rent out the space to another business and keep the asset as an investment. Leases aren’t always so easy to end though, and it could be that you find yourself liable to a multi-year lease that can’t be sold on.
As a business owner it makes sense to try and save money anywhere you can and in many cases acommercial mortgage can save you more than you’d think each year. Call our team of commercial mortgage brokers on 02920 766 565 today for impartial, whole of market advice.
Article By Ben Lloyd
July 12th, 2013
Ben is the Director and Co-Founder of the Pure Group and Managing Director of Pure Property Finance.
Following a career in Barclays, where Ben was in the real estate finance team for 8 years, he decided that the market needed a more forward-thinking type of commercial brokerage so founded Pure Commercial Finance (now Pure Property Finance), the first company within the Pure Group.
Ben has extensive experience across the real estate sector and has participated in over £2bn of real estate transactions during the course of his career.
Ben oversees the general strategy at Pure Group and works with the senior leadership team to drive the Group forward. Ben is also on the Executive Committee of FIBA.See more articles by Ben