Generally commercial mortgage lenders will accept the property you are buying as the only security for the loan provided it’s value is sufficient to meet the commercial mortgage lending criteria. Typically the property value will be between 65% and 70% of the commercial mortgage amount (LVR). The remaining 30% – 35% is required in cash payment to the vendor. Quite often anything above 65% and the lender will take both a first and second charge over the property. For example a commercial mortgage with an LVR of 70% is commonly split into 60% first mortgage and 10% second mortgage.

In the event you do not have the cash required to cover the gap between the purchase price and the commercial mortgage amount, you may be able to offer the lender additional security in form and substance acceptable to them. Typically this will mean additional commercial property in which you have sufficient equity to bridge the gap between purchase price and loan amount. Another option could be a first charge over other assets such as an insurance policy or shares. It depends upon the requirements and risk policies of the commercial mortgage lender.

A question that comes up from time to time is “Can I have a mortgage on a leasehold property?” The answer varies from one commercial mortgages lender to another. Some will with minimum remaining lease terms, others will require additional security.

About the Author: Dominic Lambrinos

Dominic Lambrinos is a financial expert who provides professional business finance solutions, commercial financial engineering, expert review of financial submissions, negotiation, equity raising, business sales, and trade financing. Dominic is also a sought after finance business trainer, and accomplished public speaker.

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