Many people get confused between Commercial Mortgages and Development Finance. They are both loans for Commercial Property but they are for different purposes. If you have a property that you want to purchase and develop you will often need more than just the purchase price. You will also need funds for the Development. That is when you need Development Finance. If you just want to purchase a property but do not need funds to begin occupation then you simply need a Commercial Mortgage which will be a percentage of the purchase price. Development Finance is short term and it will need to be replaced by a longer term Commercial Mortgage once the property development is finished and the property is up and running.

Clearly Commercial loans and Development loans can cover the same ground and increasingly there is a tendency for that to happen. Although Commercial Loans are harder to get in the current economic crisis Developments loans do have funding. More and more lenders are coming into the market with products for Development Loans.

The type of project covered by Development funding is a property which needs to be refurbished for a new use or land where you want to build. Often the loan is structured in as a loan on the property which will be for say 70% or so of the purchase price and used to buy the land and then funds to do the Development.

The Development loan is known as Mezzanine Finance. It is short term funding for the work that needs to be done to finish the job. It will often cover more than the purchase price although you will normally have to put in funds as well. You can get 100% finance but if you do not have a track record with the lender in such projects may be required to take on someone the Lender knows as a Partner to work with you and who will negotiate a profit share.

The person who develops a property will be quite clear what they want to achieve. The problem is getting the right finance from a Lender who can understand and support that vision. That is why it can be so difficult to find the right Lender and why probably using a Broker experienced in the market is essential.

The right Lender i.e. one who is likely to lend to such a project will be one who understands and wants to support such projects. But they will make their decision based on an expert appraisal in detail of the particular project presented to them. That means a strong case covering all aspects of the Development and the Developer has to be prepared and presented if you are to get the loan.

Those who are prepared to finance Developments have a wide range of loans to choose from because in the current economic crisis many Lenders will not lend to such projects no matter what the terms. One key factor will be the proven track record of the team doing the Development to deliver. Novice Developers will have a very hard time getting finance.

However without your own cash reserves your only option for proceeding is Development Finance because a Commercial Mortgage will not be granted and will not provide the funds you need. If necessary you may have to give extra security.

Unlike a normal mortgage the charges and interest for each loan will be individually structured based on all the factors related to the project. What you can be sure is they will be much more than a typical Commercial Mortgage because they are short term and assume that the Development will create a great deal of extra value so enabling them to be paid. If the Development does not meet those criteria it is probably not worth proceeding with.

You must also be prepared for the Lender to play an ongoing role in the project. They know how risky such projects can be and the problems that can occur so they will want to monitor progress to ensure all goes to plan. But you should welcome their involvement because their expertise may be of great assistance to you.

It’s easy to miss the hidden value of a potential investment, as is the case with Hull which still struggles to shed its image of a cold, dreary, deprived northern town. The fact is that has not been the case since the turn of the century, Hull has been undergoing a 2 billion facelift which is scheduled to be completed in 2015, 15 years after it began. Hull is once again an attractive opportunity for businesses and entrepreneurs alike.

Kingston Upon Hull (as it is officially known), population is 265,000 or so people in the county of East Riding of Yorkshire, Which is situated in the North East of England. Hull maintains a strong civic identity, with a long maritime history that continues today, to its benefit none of this has been diluted in the current regeneration of the city.

What has shaped Hull’s modern reputation as a dull town is the amount of horrid 1960’s architecture that sprung up, as Hull was heavily targeted by the Luftwaffe during the Blitz. The architecture was never the best nor the buildings themselves, which led to large parts of Hull being rundown. Currently, Hull as some of the highest unemployment figures in the UK at 8.1% of the population (Oct 2011).

Nevertheless, there were signals the various regeneration schemes were finally bringing down what were always above average levels of unemployment. Unfortunately for Hull, the Credit Crunch hit, with the emphasis on crunch when it comes to Hull.

What SMEs, property owners and entrepreneurs need to keep an eye are the many developments still to come in Hull. With the average house price in Hull being 99,500 and rising in value to the tune of 3.2% yearly, there is money to be made. Contrast those figures with the national average; 228,000 average house price which is currently depreciating 3% annually, Hull continues to show signs of being on the up. Taking a closer look at house prices, a detached house averages 179,000, semi-detached 111,000 and a flat at 77,000 approximately. (All figures are correct up to August 2011 and are from the BBC)

The next great development in Hull is simply know as The Boom, it will consist of six hundred ‘luxury flats’ retail units and boutiques, cafes and restaurants and a 120 bedroom hotel. It sill be sited on the River Humber’s East Bank and total coast is estimated at 100 million.

The first part of this development is also complete, which was to build an eye catching foot bridge that connects The Boom site to Hull’s city centre, after far too many delays, this bridge will now be opened in November 2011, connecting the 7 acres of The Boom site which will consist of nine modern apartment blocks.

The Boom is part of an overall master plan, some of this plan has already been completed, take the St Stephens Project as an example. 560,000 square footage of retail space, a shopping centre that cost 200 million and was completed in 2007. Along with the centralised transport infrastructure next door, the train station was refurbished and a coach and bus station was added to increase public transport access for Hull and its surrounding urban areas, a plan which has been a huge success.

The Humber Quays Development is half way through completion at present, the first part has been complete which consists of two office blocks, an official World Trade Centre building, a major coup for Hull’s economy, and an additional fifty one apartments. When part II gets under way, Humber Quays will have added a four star hotel of 200 bedrooms, a restaurant and more office developments with the World Trade Centre as the anchor.

Of course, as the credit crunch hit, it has led to inevitable delays as the finance for the latest parts of the regeneration dried up, a familiar story all over the country, most notably in Chester also. On top of this, Hull Forward, the Quango given responsibility to drive this project forward lost government funding in June 2010. These sound like major obstacles, but the projects continue to move forward and none have been cancelled. The endless round of delays soon seem to be coming to an end, so for investors and entrepreneurs, it is high time to ignore the general view of Hull and take a closer look at the opportunities that are arising in this newly revitalised city.

In this article we look at the Bank of China, and we will be issuing a whole range of additional articles on the subject of banks and building societies across Britain who is operating within the UK mortgage markets today.

You probably won’t be shocked to hear that the Bank of China isn’t actually a small lender and they are actually the 3rd biggest bank in the world. They are simply being written about in this category as they only play a small part in UK mortgage markets, and only entered the markets two years ago.

When they did enter the market in Britain, the bank were very choosy and had strict criteria when lending for mortgage purposes in order to keep tight control of the amount of lending and keep a good balance on service. They used only four brokers in the entire country, making them extremely cautious indeed.

Chinese restaurants and takeaways make up a high percentage of the Bank of China’s UK division customers as you may have imagined, and this information was recently detailed on their site. In spite of this, they did also confirm that they are open to commercial mortgage lending for other businesses in addition.

Loan to value is around the same, if not a little more cautious, than most other lenders in England. The LTV from the Bank of China usually sits at around the 70% LTV for loans up to 150k. Anything above that but below half a million is usually offered with a LTV of 65%.

Fifteen years is the mortgage term that the Bank of China seem to like. Most of their contracts are on a fifteen year repayment term and they only offer commercial mortgages on a repayment basis.

Commercial mortgage seekers that apply to the Bank of China for their loan have to visit one of the four brokers in the UK in order to have their application processed as part of the lender’s standard procedure.

There aren’t really any set interest rates for commercial mortgages per se, because the lender prefers to assess each case individually and offer on whatever rate they believe to be right for that case. This is similar to certain other commercial lenders.

The only comment that we can make is that there are not really any lenders offering rates of lower than base plus 3.5%, which would make it up to 4%. The Bank of England set the base rate at half a percent back in 2009 after the financial crisis swept the country. Fixed rates are not on offer so all customers are on tracker rates.

Please take note that the any figures quoted within this article were researched and were accurate at the time the article was created, and that these figures may change with time.

Is it the right option to take out a Commercial Mortgage? All personal circumstances differ, but in general terms’ taking on a commercial mortgage has many advantages for a business. Most obviously, you would own your own premises, not having to rely on rental contracts and at the same time own a valuable asset which would most likely increase in value over time. If or when you finally decide to sell your office, factory or warehouse you could profit from a capital gain at the sale.

Not having to rely on rental contracts that only last for a year to a few years in most cases means it’s easier to predict and calculate long term business costs, as with a commercial mortgage, the payments will remain relatively stable. There will be no large increases in rent to contend with, a commercial mortgage will give you a monthly repayment plan at a set rate, meaning it could be cheaper overall than renting a premise.

Other business opportunities are opened also, such as the ability to be landlord yourself and sublet a portion of your premises, creating a new revenue stream for the business. If the property is too big for just your company, subletting to numerous companies can go a long way to covering any commercial mortgage payments you have.

What Are The Advantages Of A Commercial Mortgage? Tax deductibility on commercial mortgage repayments is the best place to start. On many, though not every, commercial mortgage tax can be reclaimed as a tax expense and be deducted when your gross profits are calculated at the end of the year.

Another of the indirect goodies a commercial mortgage delivers is the option to avoid having to sell a stake in your company for capital injection. Using the equity in your commercial mortgage is a self generating way to get the cash you need to expand or pay debt off without chipping away at the control of your company.

We’ll stress this again as it’s a strong point, but having a commercial mortgage is the rock to underpin your company. You won’t have to deal with rent increase every few years that don’t help with profit and overheads, giving you a stable figure to work with over many years instead.

Who will Responsibility lie with in the Company for the Commercial Mortgage? This question all depends on the chain of command within your company, though it will always be with whoever is at the top of the pyramid. Partners in a business will be jointly responsible for any commercial mortgage, while a sole trader will have all the burden to deal with.

In a company structure with several directors, they will all be liable for the commercial mortgage and its repayments. Each will have to submit a personal director’s guarantee, which are necessities with most lenders, in which the directors will assure the lender they will take responsibility for the commercial loan.

What Amount Can I Borrow and Over What Term? The time period for commercial mortgages has a ceiling of 20 years, reduced to 15 years for older premises. Interest only commercial mortgages are available, but most will convert to capital mortgages after a certain number of years, so discuss all potential options with lenders.

You’ll have more success acquiring a commercial mortgage the LTV (Loan to Value) rate is, the higher the deposit, the lower interest will be and approval is more likely. Deposits for commercial mortgages tend to be higher than for residential mortgages, minimum deposit will be 20% with the average reaching no higher than 30%. But like I already stated, the more you can deposit up front, the better for you and your business in the long term.

Buying or renting your commercial premises can be a tough decision, especially if you are a relatively small business. But what is the right choice for you?

If you need to move quickly or require flexibility in your premises to contract and expand then renting may be your best option. Businesses that see fluctuation in demand may require the ability to grow and shrink in size and so renting would be a good option. Buying a commercial property may well be suited to a business that is looking for a level of stability and to benefit from an increase in value of the asset.

Buying commercial property: Buying a commercial property means that you can immediately benefit from an increase in the value of your property asset. Ownership of an office building or warehouse can add significant value to your company assets as the value of your property increases over time. You may also find that buying a commercial property makes you money on a monthly basis; often you will find that your commercial mortgage repayments are lower than the equivalent rental payments.

Renting rather than buying can also eliminate the issue of last minute maintenance costs. As a tenant, the landlord generally pays for maintenance costs, anything that needs fixing, redecorating for wear and tear and the costs of securing the building as well as buildings insurance, so you will have more money to build your company. Also you won’t suffer so much if the market crashes like it did in recent times, but you should keep in mind that rent can still increase if the economy suffers.

It may also be the case that you are able to buy a property that is larger than you need allowing you to sublet the additional space. This would allow you to generate important rental income that could contribute towards your commercial mortgage.

Buying Commercial Property and Commercial Mortgages: Buying a commercial property has the advantage that every mortgage payment means that the company owns more and more of the property, rather than it being dead money if you are renting. Property is an excellent investment as the value increases, this increasing the business asset value. Mortgage payment can often be lower than rental costs too if you can get a good interest rate.

Mortgage payments made for commercial property by a business are also allowed as an expense for tax purposes so you can actually get some money back and/or pay less tax, which of course is always a plus. For company directors, you can often also buy a property through certain pension plans, although it would be best to speak to a financial adviser before making such a decision as the process can be complicated and carries certain risks.

Renting provides a more flexible option should your business need to move, expand or contract. Businesses that suddenly need to expand or contract can find it easier to do so if their premises are rented than if owned. In summary relocating is much easier to manage if you rent premises than own them.

The only downside is that commercial mortgages often require a large deposit, but if the capital is there that won’t be a problem. Depending on your company’s situation and the building being purchased, the deposit can be up to 50% of the property value. You’ll also need to be quite sure that you will be happy where you are as the costs of relocating will be very high compared with those of moving from one rented property to another.

Deciding to rent your business premises or to buy with a commercial mortgage will depend very much on the specific needs of your business. Taking into account the above points will help you come to the right decision for your business.

When considering home improvements for your property, it is vital that you don’t neglect the outside of the house. A garden improvement project could add value to your home so that when you come to sell, it is worth more money as it will be more appealing.

Before you start, have a clear up in the garden and tidy it up a little. Hide bins away, cut the lawn, prune any hedges and trees and just generally make it look trim. Getting new plant pots and trellises can also help to make the garden look much neater than it did before.

Plants can be expensive but they are often cheaper in larger DIY stores than in garden centres so shop around and don’t pay top prices. A few new plants and flowers in the garden can make a big difference and you can even add in something exotic like a fruit tree!

Although slightly more expensive, adding in a water fountain or waterfall can really boost the interest in your property when trying to sell. The sound of trickling water is very relaxing and many people will love the idea of getting home after a hard day and chilling out in their new garden.

Many people are concerned today with green issues so show you care by adding something green in. Even a wooden seating area with solar powered lights or something simple like that could interest green buyers and boost the value of your property.

You need to ’stage’ the garden so that potential buyers can see themselves in it. Some strategically placed garden furniture made of lovely natural woods can make the garden look really lovely.

If you have a garage then you might want to consider converting it into additional living space - it could make a great playroom for the kids! If you don’t quite want to spend that much then you can simply leave the space very tidy so that buyers can see the potential.

If you have a small garden at the front of your home but nowhere to park the car, you could transform your front garden into a drive to make the property more appealing. Only consider this if you have a rear garden however as removing all garden space can devalue your home.

One of the most important things to remember is that whatever improvements you decide to do, ensure that the garden is easy to look after as high maintenance gardens are off-putting to buyers.

If you’re not sure how to finance a garden project then why not consider getting a remortgage as you can borrow the funds that you need without any fuss or high interest rates!

Because of the varied forms of commercial mortgage lenders, a commercial entity has a few more options when trying secure capital, rather than just one option. This encourages free enterprise and allows for many more entrepreneurs to remain competitive.

If you are a borrower keen on having a commercial mortgage property, you can avail a commercial mortgage loan. There are various commercial mortgage lenders who can help get a favourable deal. Anyone who is looking forward to purchase or refinance business premises or commercial property can benefit from their services.

The present economic downturn has caused many commercial mortgage lenders to maintain a low profile and entertain new business only under extremely guarded conditions based on stringent criteria. This defensive strategy is not unusual in troubled times.

In an already challenging business environment, the prospect of getting a new commercial mortgage can at times seem dim. The lack of available funding can hamper the business dreams of many enterprising men and women who have sound business plans. Fortunately, lenders have not disappeared from the scene entirely. They are, however, strongly insistent on ironclad evidence of future success. If certain hurdles can be overcome, it is possible to get a good commercial mortgage loan even in these lean years.

In a commercial mortgage, the liability for defaulting on your payments is restricted to the property pledged as collateral. As a result, money lenders have very stringent conditions before they will consider sanctioning a new loan. Usually this decision is made under the watchful eye of seasoned professional with a strong track record in successfully navigating the aggressive and dangerous capital markets.

Luckily, there are many commercial mortgage lenders out there that can help you out along the way by providing you with the service that you are looking for when you need it the most. The great thing about a commercial lender is that they give their borrowers many different options to choose from and a number of different payment schedules that can be considered.

There are three golden rules to buying any commercial property, bear these in mind and you might well be able to avoid a lot of heartache and financial headaches. The benefits of buying commercial property can be great. You can benefit from excellent capital growth and take a regular income from the rental payments your property generates. There can be a flip side though, as with any investment, there are pluses and minuses of commercial property. This easy guide looks at the most important things you should always bear in mind when buying.

Get a good survey: The responsibility for identifying structural problems with a commercial property lies mainly with you; the buyer. A seller doesn’t have to reveal any problems in a commercial property that they are selling. So, only by instructing a quality survey will you be able to confirm the structural integrity of the property.

Whilst the kinds of major structural defects that could ultimately render the property uninhabitable (such as a problem with underpinning) may have to be revealed up front (normally meaning that these sorts of properties are easy to spot), other less life threatening, but still extremely important structural defects do not, an example of this might be dry rot. It is your wealth at stake which means it is down to you to do the necessary investigative work to discover any issues during the purchasing process. Discovering problems after you have completed will leave you with no legal cover what so ever.

The only way you can insulate yourself against this kind of problem is by having a full structural survey on any commercial property that you are planning to buy. This is the rule of thumb unless the property is a new build. The valuation of the property will also establish if there have been alterations or extensions to the building which might have required planning permission or building regulations approval.

Beware of restrictive covenants: Many people buy commercial property with a view to changing the usage or the layout of the property. However, a ‘restrictive covenant’ may prevent you from undertaking your plans. So, it is worth contacting the Land Registry to determine whether any such restrictions apply to the property that you are planning to buy.

The Land Registry Charges Register contains information relating to any restrictive covenants that the commercial property is subject to. These may have a substantial bearing on your intentions for the property and may affect your decision as to whether to proceed with the purchase at all.

Get the right searches: Obtaining the correct searches is another vital part of buying commercial property. A Local Authority Search will outline whether any enforcement notices or compulsory purchase orders apply to the property. It will also outline any local road or transport schemes that may affect the property. It costs around 200 and takes around 2-3 weeks to complete.

Drainage and Water search comes next on out shopping list, costing 140 but only taking a few days to complete. It checks whether your drainage and pipe are linked to the main sewer system and that all are in working order. They will specifically check if the connection the mains sewer is within a 100ft, the water supply in is in good order and that there is a functioning water metre on the premises.

Environmental Search is next at 180, checking for any harmful substances that might be damaging the surrounding area or building, such as asbestos. It will also check if the building is in a flood risk area and whether it is liable to flooding. Not acquiring this search and report can come with fines that could total in the thousands if something were to happen that causes environmental damage in the future. As the commercial landlord, you would be held responsible.

In order to profit from commercial property it is vital that you undertake all the due diligence when buying. Failing to obtain a good survey or the right searches may save you a small amount of money in the short term but could end up costing you thousands of pounds in the long run.

Commercial Mortgages give business owners and investors the ability to buy their own offices, factories and warehouses, growing their businesses and giving them a solid foundation. That is one general advantage; below we’ve listed a few more specific advantages of commercial mortgages.

1. You Own The Business Property: Obviously the property you buy to house your business is a significant asset for you business. Even through recession, the British property market usually finds that over the long term property prices are always rising, so you are looking at a healthy profit on the property after a decade or two.

2. Commercial Mortgage Repayments Are Tax Deductable: The whole mortgage payment is not deductable, only the interest on the mortgage payment is. HMRC classes the interest as an allowable expense which boosts the balance sheet when the tax returns are due.

3. Cut out the middle man: When renting a commercial property, the rent you pay is subject to regular reviews (normally conducted annually, and in theory, in line with inflation). At this time, your rent payments always go up and could increase significantly, making it difficult for you to budget. The commercial mortgage offers you more stable payment terms by cutting out the middle man. This means it is easier to manage your out goings.

4. Cheap Borrowing: Some businesses borrow commercial mortgages to consolidate other business debts, in much the same way that households have done with residential mortgages in the last ten years. If your business is paying a high interest rate on an overdraft, unsecured loan or credit card it might be more cost effective to use a commercial loan to pay these unsecured borrowings.

5. Make sure you are the landlord not the tenant: IF you decide to buy commercial premises, you might buy property that is too large for your overall needs. Whilst you can use the premises to expand into in the future, it also offers potential space for sub-letting in the short term. This is a useful way of generating extra income to help pay the mortgage. This is something that you will need the permission of the mortgage lender for.

6. Cash Flow Eases: Touched on earlier in the list with stability, a commercial mortgage is going to be easier on the cash flow. With commercial mortgages being spread over decades there is little volatility in the mortgage payments, allowing you to focus solely on the profit/loss margins of your business.

7. You Have Complete Control: You don’t have to consider ways of raising capital that would dilute control of your company, i.e. selling shares in your business. On top of this any investors would expect a profit on their money or a dividend payment, sucking money out of your company. A commercial mortgage lender will only gain the interest from the mortgage, which in itself is spread over the life of the mortgage. You will have a valuable asset in your company and retain 100% control, so you can decide the direction and plan of action for your business and the property.

8. You retain the capital: When purchasing commercial property, raising investment capital using a commercial mortgage means that you won’t have to expend all the capital that you have available. You can put forward a deposit and borrow the rest from a lender, allowing you to invest the remainder of your cash reserves in other more useful ways.

9. You control the property: If you rent a property, you are restricted in several ways in what you can do. You may need permission from the landlord to alter the layout, to redesign or to update the usage of the property. If you decide to take out a commercial mortgage, it allows you to take ownership of the property, which of course means that you can make whatever changes to it you wish without having to seek a landlord’s permission. Obviously you still need to stay within local planning regulations.

10. Save money: In simple terms, a commercial mortgage payment is often less than the equivalent rent payment. You may find that you actually save money on a monthly basis by borrowing, notwithstanding annual rent increases through the rent review process.

Buying a commercial mortgage is a complex and time consuming process, every stage takes longer than a residential mortgage as there are many more factors to take into account. For this reason alone the most important thing to getting a commercial mortgage right is getting the right solicitor.

Consequently, finding an experienced, reliable and affordable property solicitor is an important part of the purchase process. A commercial property deal throws up many legal issues and so it is vital that you have the right team on board. Our guide will help you find the right property solicitor for you.

Red Tape: Make sure you get a solicitor who is under the umbrella of the Solicitors Regulatory Authority, those that are in the RSA are regulated and fully insured members. This is advantageous as you know they’re not a stereotypical shady solicitor, as they’re insured it means you as the client are protected during the mortgage process as well as having an official outlet for complaints through the RSA if you feel the need to take that route.

Locals: While you might feel more important and reassured having a large national or international law firm representing you, they are very rarely the best choice. Turning to a smaller, local practice will mean you have solicitors who are very experienced in the local property market, they will know which searches to do, local rates and bye laws to be aware of and know the regions property market inside out. They will see all the problems two steps ahead as they know the area better than any big name law firm ever could, no matter how brilliant the solicitor could be.

Fees and Costs: It’s all about value for money, naturally you don’t want to go for the cheapest solicitor no matter what they offer, yet at the other end of the spectrum the most expensive solicitor isn’t going to be ten times smarter and worth the fees either. Talk to each firm and see what services they do and don’t offer, look at what to expect rather than what they will cost.

Depending on the complexity of the deal, legal costs are going to range from a the hundreds to thousands of pounds. Plus you can expect added/separate costs known as disbursements for things such as VAT or Local Authority Searches, so budget accordingly.

When you appoint a solicitor, they are obliged to provide you with a schedule of costs and an estimate for how much your specific transaction will be. So, make sure that you understand how a solicitor’s fees work and what you can expect to pay in total. Even large solicitors are prepared to discuss fees with you and so don’t be afraid to thrash out the issue of fees before you formally appoint a commercial property solicitor.

Experience is Key: As we touched on before, experience is key, not just in the local area and region, but as a solicitor in general. Many specialise in certain deals and areas so always ask what they have specialised in and about any extra qualifications they might have. On top of this, years as a solicitor, how many commercial mortgages have they done recently or in the past and ask if they are accredited with the Law Society.

As well as sorting out costs and services, always make it a point to ask who exactly you will be dealing with. Even in a small local law firm there could be a few solicitors working in the practice, when you go to meet them you might just end up talking to the guy in charge and mistake him for the person who will be doing the work. You don’t want to end up with the graduate straight out of university being the lead on such a complex and expensive deal.

There’s never a shortage of commercial property solicitors and many commercial mortgage firms will have recommendations for you. Taking the time to find who’s right for you should be a top priority as it’s possible this will be the most expensive part of the mortgage to handle, (outside of the deposit of course!)