Commercial Mortgages - Interest Rates

Rather than offering you lots of different interest rates which are applicable only to certain products and expecting you to understand each one and to make a sound financial decision about which interest rate is the best, we prefer to keep things simple. This is why we have chosen one interest rate which varies only according to your circumstances.

Our rate is set at a fixed margin above the LIBOR rate. This is the London Inter Bank Offer Rate and is the rate at which the banks lend money to one another in the City.

The LIBOR changes on a daily basis, however is set at a fixed amount for three, six and twelve months, depending on the market. We use the three month LIBOR and quote interest rates at a percentage above the current three month LIBOR. We feel that this makes our interest rate both easy to use and competitive.

The margin above the LIBOR which you will pay will depend on 3 factors:

1. The amount you are borrowing. As a general guide, loan amounts below £250,000 will pay a higher margin than loans above £250,000.
   
2. Your Loan to Value ratio: if you want to borrow only 50% of the value of your business premises, you will pay a lower margin than if you need up to 80% of the value, due to the increased risk involved.
   
3. Your personal circumstances and ability to pay the loan back. For instance, if you are deemed a bigger risk, the margin will be higher than if you can easily make your monthly repayments.

Example 1

You are expanding your premises for your growing business. Your property is worth £200,000. You need to borrow 50% of the value of your premises to fund the build and refurbishment. Your credit history is excellent and your company is generating more than enough cash to make the monthly payments. You are an established business and can prove your income. The LIBOR is 4.55% and you are offered a rate of 2.75% above this rate. The rate you pay will be 4.55% plus 2.75% making your monthly interest rate 7.3%.

Example 2

You wish to remortgage your small business premises to consolidate your debts and make a few large acquisitions. Your property value is £100,000 and you need £75,000 to clear your debts and buy the new equipment. You have had a patchy trading history in the past but can prove that the new equipment will generate more business. The LIBOR rate is 4.55% and you are offered a rate of 4.25% above the LIBOR. The rate you pay will be 4.55% plus 4.25% making your monthly interest rate 8.8%.

More Commercial Mortgage Topics:

• Would It Work? - why a commercial mortgage would work for your business
• Use and Benefits - weigh up the pros and cons
• Who Can Get One? - who can take out a commercial mortgage?
• Bad Credit History - don't let credit history stop you
• Self Certification - make sure you have the right documents
• Property Types - property types that we allow
• Our Commercial Mortgages - how our mortgages work
• Interest Rates - understand interest rates with some examples
• Security - make sure you're secure
• Fees - understanding confusing legal fees
• Filling in an Application Form - don't worry they're easy - learn here

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