Summary: Securing a commercial mortgage involves more than just the loan amount. You should expect to pay several upfront fees, including arrangement, valuation, legal, and broker fees, which can total 2-5% or more of the loan value. Failing to budget for these costs or meet repayments can put your property at significant risk.

Summary: You will typically need a deposit of between 25% and 40% for a commercial mortgage in the UK. The exact amount depends on the lender’s assessment of risk, which is influenced by your business’s financial health, the type of property, and your industry experience. A larger deposit generally improves your chances of approval and may lead to better interest rates.

Summary: While interest rates dictate the long-term cost, you must budget substantial sums for upfront expenses, including arrangement fees (often 1% to 5% of the loan), legal fees (covering both your solicitor and the lender’s solicitor), and mandatory Red Book valuations. These costs are typically payable regardless of whether the deal completes, representing a significant initial outlay.

Summary: Arrangement fees are upfront costs (usually 0.5% to 5% of the loan amount) levied by commercial mortgage lenders to cover administrative setup, underwriting, and risk assessment. These fees can often be paid upfront or added (rolled up) to the loan balance, but rolling them up means you pay interest on the fee, increasing the total cost of borrowing.

Summary: Commercial mortgage rates are highly dependent on the perceived risk associated with both the specific property and the industry of the borrowing business. High-stability sectors like professional offices typically attract lower rates, whereas high-volatility sectors such as hospitality, leisure, or specialist manufacturing often face significantly higher borrowing costs due to increased operational and economic uncertainties.

Summary: Commercial mortgage legal fees typically involve paying for both the lender’s solicitor and your own solicitor, plus substantial disbursements (third-party search fees and Land Registry costs). These fees are highly variable, often ranging from £2,500 for simple cases up to tens of thousands of pounds for complex or high-value transactions, reflecting the intense legal work required to protect the lender’s security.

Summary: Yes, you can lock in a commercial mortgage interest rate, primarily by selecting a fixed-rate product offered by the lender for a set term (e.g., 2, 5, or 10 years). Additionally, some lenders offer rate lock agreements during the application process, often for a fee, which guarantees the agreed rate for a defined period while the underwriting proceeds, shielding the borrower from immediate market increases.

Summary: Commercial mortgage rates are heavily influenced by the Bank of England Base Rate and wider economic volatility, especially inflation expectations. When the market perceives higher risk or when the cost of funds increases for lenders, rates typically rise. Borrowers can manage this risk through careful selection of fixed versus variable rate products.

Summary: Capital repayment mortgages mean your monthly payments reduce both the interest charged and the original loan amount, guaranteeing the debt is fully cleared by the end of the term. Interest-only mortgages mean monthly payments cover only the interest, resulting in lower immediate costs but requiring the full original loan amount (the capital) to be repaid as a lump sum at the end of the term, necessitating a watertight repayment strategy.

Summary: Strategic refinancing or restructuring your commercial mortgage can significantly lower your monthly outgoing costs. Options include extending the loan term to reduce payments or seeking a better interest rate from a new lender. Always weigh the potential savings against early repayment charges and refinancing fees to ensure a net financial benefit.

Summary: Fixed-rate commercial mortgages offer payment predictability and budgeting certainty, shielding the borrower from interest rate rises, but they forfeit potential savings if rates fall. Variable-rate mortgages are inherently riskier due to fluctuating payments tied to the Bank of England Base Rate (BBR) or LIBOR/SONIA, but they offer flexibility and potential cost reductions during periods of monetary easing.

Summary: Commercial mortgages incur significant fees, most commonly including arrangement (or facility) fees charged by the lender, valuation fees, and solicitor/legal costs. These costs are often substantial and must be factored into the total borrowing cost, which could increase your overall financial commitment and reduce the effective loan amount available for property purchase.

Summary: Commercial mortgage interest rates are typically calculated by adding a fixed margin (based on lender assessment of risk, LTV, and property type) to a variable reference rate, such as the Bank of England Base Rate or SONIA. Due to the higher perceived risk compared to residential lending, rates are generally higher and subject to rigorous borrower scrutiny.

Summary: Commercial mortgage fees, particularly the lender’s arrangement fee, are generally negotiable, especially for strong applicants or high-value loans. However, third-party costs like valuation and legal fees are typically non-negotiable fixed expenses passed directly from the service provider to the borrower. Effective negotiation requires preparation, comparing offers, and demonstrating financial strength.