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Whether you are looking to buy a commercial property to house your company, as an investment or needing to get a loan to expand your business, there are a number of different options available.
The fundamentals surrounding borrowing for commercial endeavours are a little different from those that affect residential. Commercial and business ventures often require more of a specialist approach as the main trading banks have most of their resources dedicated to funding owner-occupied & investment residential lending.
Commercial property investment is more popular now than it was before the GFC due to a combination a rapidly growing business population, historically low interest rates & the Reserve Bank decision to cut loan-to-value ratio on residential investment to 60%, nationwide.
It’s important to know that trading banks change their appetite all of time in regard to the type of lending they want to be involved with. This applies equally to commercial and business lending. Just because you have been with a particular bank for many years does not mean that they will lend you the most money for a commercial venture, in fact they may not lend at all.
Having an overview of the whole lending market is imperative, not only work out where you can borrow the most but to make sure that the lending you get is at the best rate and structure for your needs.
When it comes to funding for the development of commercial property, or where commercial property is acquired for the purposes of tenanting and on-selling, there are a number of options outside the main trading banks. These lenders understand quick turn-around of property and focus on the asset as opposed to needing to prove income. These types of lenders are also useful for those borrowers who would like to hold a property for a longer term but cannot prove income at the time of purchase.
Even if you don’t own a commercial property there is often a need to borrow for the purposes of expanding a business. This requires borrowing against the current cashflow, or projected income, and provides its own challenges as the lenders cannot secure over “bricks and mortar” but need to take security over the business.
There has never been a time when the banks look at lending propositions in more detail than they do now. It is important to present the deal in the right way to the right people and that’s what we specialise in at Edge Mortgages. For more than a decade we have helped many people into commercial property and with business loans.
If you are looking at any type of commercial project it makes sense to surround yourself with a good team. We can help with all your finance requirements and are happy to discuss your plans.
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How much will you be able to borrow?
First up, and if you are like most people, one of the biggest questions will be about how much you will be able to borrow.
This is down to your income and your commitments. The banks will decide how much they will lend to you based on your total income against your total outgoings. The interest rates that are applicable at the time will be also be taken into account when deciding how much you will be able to borrow. But every bank has different lending criteria. This means that one bank may lend you a lot more that another on exactly the same day, given exactly the same circumstances.
Restrictions on loans for people who don’t have a 20% deposit recently become an additional challenge for first home buyers. This is where a mortgage broker can help, by working through all the different options available to make sure you get that dream home and the best deal. And the good news is, if you’ve been turned down for a loan by your bank (even if you have been a customer of theirs for a for a long time) it doesn’t mean that you won’t be able to get a loan from anyone else.
There are different mortgage structures that can allow you to pay your mortgage off sooner, or provide you with some certainty about your payments.
Should you fix your mortgage interest rate for a certain length of time or have some of it on a floating interest rate? Which should you chose? What about repayment options?
The key to all this is to get an independent, expert overview of your options so you get the best deal given your individual circumstances.
At Edge Mortgages we know a number of different lender’s calculators, criteria and options. We can let you know, in one quick phone conversation, much you can afford to borrow, so just give us a call.