A very popular investment in the United Kingdom is buying commercial properties such as offices, restaurants, or buildings for industry or retail outlets to rent out. This is a fast growing industry and there is a lot of growth potential in owning and renting out commercial properties.

If you are considering getting a business mortgage to purchase some commercial property to let out, the commercial mortgage lenders will want to be sure that the rent will cover the commercial mortgage by one hundred and thirty per cent. Generally, the amount of a commercial mortgage will be about seventy-five percent of the market value of the considered property.

As in all other forms of a business mortgage, you have to apply for a buy to let commercial mortgage. The commercial mortgage lender will ask you for the same types of documents that the other types of loans require. You want to show a profit and loss statement as well as an asset and liability statements. Be sure to have 6 months worth of bank statements as well as lease information.

There are different types of commercial leases that you can hold for your commercial properties. There is a standard lease that is similar to a residential lease, but since it is for commercial purposes, you want to make sure that you have legal advice while drawing up the lease. You want to make sure that you have all of the correct clauses in the agreement. You also will have to make sure that the title deeds are correct as well as any covenants.

One type of lease to consider is a shorthold tenancy lease. This type of lease allows you to rent the property for certain period of time, usually between one to five years. This renting or letting is done by a landlord that does not live on the property. With this type of lease, it will be easier to get your property back in the future.

The length of a buy to let mortgage can be run anywhere up to approximately 25 years. These kinds of commercial mortgage loans are usually either variable or fixed rate mortgages. The rates are based on the either the Bank of England base rate or the London Inter Bank Offer rate. These rates usually hover between one and a half per cent and three per cent above these rates. You should also add in another one per cent which in commercial loan terminology covers an arrangement fee. This is usually due when the commercial mortgage is accepted, however, rather than paying at that time, it is often added in to the amount of the loan.

Mortgage rates are often the most important factor when choosing a lender and the type of loan. The interest rate affects the monthly payment
the borrower has to make. If mortgage rates increase then, unless the interest rate payable on the loan is capped or fixed, the amount payable each month will also increase. The length of the loan term also affects the amount payable each month. There is a direct relationship between the term of the loan and the monthly installment. The monthly installment will be less the longer the term of the loan.

Fixed mortgage rates tie in the interest rate current at the start of the mortgage for either the entire term of the mortgage or for a set period. If you wish to have a set amount for each installment then a fixed rated mortgage seems like a good option. It will give you the security of knowing what you are going to have to pay each month. The monthly installment does not increase when mortgage rates go up. However, if the underlying interest rate decreases then borrowers on a fixed rate mortgage will not receive any decrease in their monthly payment. In the case of variable or adjustable rate mortgages the amount payable each month may increase or decrease depending on the prevailing interest rate.

Mortgage rates are applied to the outstanding principal amount. The rate is decided upon by the lender and depends on the factors referred to above. As the principal amount reduces the amount of each installment that is applied to the principal will increase. So at the start of the mortgage most of the installment will go towards paying off the interest, at the end of the terms the majority of the installment can be applied to the principal amount. Borrowers can arrange just to pay interest in the first few years but although this may relieve some financial pressure at the start of the mortgage it may mean the mortgage costs quite a bit more over its duration.

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