Commercial mortgage - is this a good rate?

punjabi

All,

I'm buying my first commercial (retail) investment, and I'm looking for finance.

I realise that commercial Mortgage Rates are different to residential mortage rates - 'cos the quality of tenant, length of lease, lease terms etc etc are all taken into account, but I've got the following situation on a retail investment that I'm about to buy:

Purchase price : 280K
Loan required : 210K (75%)
Rental income : £16.5K/year
Lease : new 15 years, no break clauses
Tenant : a blue chip, household name company
Location : Primiary - High street - in Berks

Loan terms : 25 years, on a repayment basis

I've been quoted a 3-month LIBOR + 1.25% (ie. 4.97 + 1.25 = 6.22%) with a lenders fee of 0.4%, no agents arangement fee, and a valuation of about £500. Legals etc are extra.

Does this sound OK?
Also, a naive question - why do lenders use LIBOR, rather than Bank Rate (which would be 4.75%)?

Thanks all in advance.

P

Xbigman

I know nothing about the technicalities of commercial mortgages but 16.5k return on an outlay of 280k is about 6%, that seems low to me and probably seems low to your lender.
Regards



X

AndrewSmith

The rate offered to you in comparison with the general rates available for commercial mortgages is very good.

payless

I looked at buying a property rented to a blue chip company....but sold at auction for more than I would pay ( or could afford/raise !) ... the rental yield ended up at 4%