Commercial mortgage possibility

andystephens

Hi all,

Not sure if I chave posted this in the right place.

My partner is a lover of horses, always had a horse and has worked with them as well. Basically, she wants to run her own stable yard, with around 10 stables with some on Full livery and some on part livery.

My question is this. We have been looking at properties which also include a house with the stables (would solve our current living problems). As this would be run as a business, do we take out a commercial mortgage on the whole lot, house and stables/land? Also, as they are quite pricey, how would we do it? Would they look at the potential income and lend on that basis (from a business plan)?

I would continue to work, while my partner would run the livery yard. Do you think this is viable? Any help would be greatly appreciated.

Thanks

Andy

toonfish

I would look at a bog standard residential mortgage first if it's achievable - some companies will allow an element of business use anyway but a commercial deal will cost you so much more. Also, none of the actual house will be used for the business I guess?


Much depends on the incomes, and the amount you need to borrow but I know the like of Halifax & Northern Rock might consider it.

AndrewSmith

Depends also on the percentage of the overall property being used for residential/commercial purposes.

Also it will greatly depend on how the title is registered with the local planning dept. If it is registered as a residential property then you may be able to finance it as a residential purchase. If the property is registered with the local planning dept as a commercial property then you will have 2 choices:

1) Change the title of use to residential

2) Obtain commercial finance on the entire purchase (however this will be more expensive potentially than a residential mortgage)


How it is registered with the planning dept will also determine whether you pay council tax in a residential banding or commercial business rates.

Also as you are loking at livestock and livery it may be worth asking your solicitor to check for any agricultural restrictions on the property.

andystephens

The house would be just for residential use.

The problem with looking at residential mortgages is the amount we can borrow. As far as I am aware, with a commercial mortgage, they look at the business plan and the income and lend on that. Have I got that part correct? I understand that we would be paying extra for the commercial mortgage and are willing to accept that if it means we can get a property and run a business.

toonfish

andystephens wrote: »

The house would be just for residential use.

The problem with looking at residential mortgages is the amount we can borrow. As far as I am aware, with a commercial mortgage, they look at the business plan and the income and lend on that. Have I got that part correct? I understand that we would be paying extra for the commercial mortgage and are willing to accept that if it means we can get a property and run a business.

Give us an idea of the figures - current income, purchase price and how much you need to borrow. Also the projected livery income. Unless you are taking over an existing business a lender is rarely prepared to lend on a "start up", and especially not at a sensible rate.

AndrewSmith

Yes, but most commercial mortgages, certainly those via high street lenders, will only lend up to 75% of the building value, with fixtures and fittings etc having to be funded another way.

High street lenders may also want evidence from the current owners that it is possible to run a sucessful business from the property if it is being done so already.

If not then you have the problem of change of use at the local planning dept, convincing the bank that the business will be profitable and the higher costs of a commercial purchase.

andystephens

Ok, these are basic figures. Also, we would be looking to take over an existing business, as we would probably find this easier!!

Properties we have seen including land and stables in the region of 700k

With 10 stables, we can charge between 400 and 600 a month livery. Some of the properties do have up to 15 stables.

I earn 17k a year and partner earns 13.5k. We have some savings, but not alot. We just wanted to know if its veasible and what options we have available.

AndrewSmith

Do you have a 25% deposit available? If not you will be paying through the nose via a 'commercial specialist lender'.

andystephens

That could be where the problem lies - thats with the deposit.

We dont have much, so I am not sure of the possibilities of the mortgage with a higher LTV. My partner understands that we would be paying extra, but she thinks its worth it for her dream.

Do you think its possible?? Maybe on a stretch??

AndrewSmith

On a commercial mortgage based on, say, 15% deposit you would be looking at interest rates in excess of 8.5% normally. Bear in mind also that most commercial lenders want the mortgage on capital and interest basis based on terms of 20 years or less. Approx calculation:

£700,000 purchase price
£105,000 15% deposit
£595,000 mortgage

Using the approx above the monthly payments at 8.5% over 20 years would be £5163.

You may be able to get a lender to agree interest only for the first 3 years but there would be a price to pay by way of a higher interest rate.

Anything less than a 15% deposit, forget it.

andystephens

I see. Well it certainly gives us something to think about.

I dont think that those figures will put my partner off, we just need to make sure we can afford it......

Thank you for helping us with the options