Commercial mortgage fees and costs
Commercial mortgages and the different fees and penalties you may have to pay.
Interest rates vary according to the lender and the repayment options you choose.
Other fees and costs include:
- Arrangement or processing fees - these are fees that your lender charges for arranging your mortgage. A typical fee might be in the region of 0.5% to 2.75% of the loan and is usually negotiable.
- Valuation fee - this is the fee charged by the lender for carrying out the valuation of the property and can vary according to the lender. Further costs are incurred if the lender insists upon a full structural survey to establish the valuation.
- Redemption penalty - if you pay off your mortgage early, you may have to pay an additional amount, which is also known as an early repayment penalty. This is usually applicable in the first three to five years of the mortgage, although it can sometimes apply after that.
- Legal and professional fees - these can include insurance, site surveys and preparation of legal documents.
There are certain other factors you should be aware of:
- Minimum level for the loan - commercial mortgages are usually only given for substantial amounts, with higher sums in other circumstances depending on the value of your property and the nature of your business.
- Period of grace - some lenders are flexible about late payments, underpayments or payment holidays - but you may incur increased interest charges.
- Personal guarantee - if you run a limited company, the bank may ask you for a personal guarantee as additional security, especially if the amount of cash you are investing is limited.
For further information, see repaying a commercial mortgage.
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