Should I use a commercial mortgage broker when buying a business property?
A commercial mortgage broker can help you compare the market for commercial mortgages but are they worth the extra cost? We look at the advantages of using a commercial mortgage broker and whether it is best to go it alone.
If you are looking to arrange a commercial mortgage so that you can buy a premises for your business, or to make a business investment, you can either go it alone or use the services of a commercial mortgage broker.
While you can approach lenders yourself to arrange a mortgage, the commercial property market is complex and a specialist mortgage broker can help navigate your way through finding the right product, especially if this is your first time.
Do I need to use a commercial mortgage broker?
There are pros and cons to using a commercial mortgage broker and it is worth weighing up both before moving forward with your application.
If you used a commercial mortgage broker for your first business mortgage application, you might feel more confident to go it alone the next time.Alternatively, you may feel that having used an expert broker once, there’s no going back. Here we go through the pros and cons of going down the broker route.
» COMPARE: Compare commercial mortgages
Advantages of using a commercial mortgage broker
A wider view of the commercial mortgage market
While there are several High Street lenders that offer commercial mortgages,there are many lenders that aren’t high profile names, such as specialist lenders and private banks. If you don’t know about them then it can be hard to find out what they offer. A good mortgage broker should be able to show you a wider range of what is available, both from mainstream lenders and smaller, niche providers.
Access to mortgages from the whole of the market
Some lenders will not even consider applications made directly by borrowers as they only go through intermediaries, so using a specialist broker may give you a wider range of options.They should be able to find the best deal for you in terms of rates and charges, which on a sizeable mortgage, could lead to significant savings over the course of a loan.
An up-to-date view of the market
Brokers deal with lenders every day and are able to see how fast some lenders are dealing with mortgage applications, which can be useful if there is a need to get the process moving as fast as possible.
A guide through the process
Buying a property is a complicated process even without the mortgage application, and you might find that you feel more comfortable having an experienced broker to take you through every stage. A broker will check to make sure that you have all the necessary paperwork and will check that you have filled out all the relevant documents correctly.
An easier way to buy multiple properties
If you are buying several properties at one time, a broker will be able to treat that as a single package for the purposes of applying for a mortgage, and find the best commercial rate across the whole portfolio.
Insight when remortgaging
Even after the commercial mortgage has been arranged and the property purchased, your broker should be able to keep an eye on the market and, when it is time to remortgage, should be able to recommend the best lender to switch to, to keep on the lowest possible rate available.
The disadvantages of using a commercial mortgage broker
Costs and fees
Most brokers will charge broker fees for arranging a commercial mortgage for their clients. This could take the form of two charges: firstly there could be a flat administration fee charged upfront to take on your application, and a charge for arranging the loan itself. This could be anything from 1% upwards of the loan amount.
Potential commercial relationships
Reputable mortgage brokers should be transparent when it comes to letting customers know what commercial relationships they have with lenders and what fees they are getting from lenders to arrange a mortgage with them.
Source: Getty Images
Sarah Bridge has been writing about business and finance since 2000. She was formerly Deputy Editor, Personal Finance, The Mail on Sunday and was previously the paper's Leisure Correspondent. Read more