Why owner-occupied premises are different
With an investment property, a tenant's rent supports the loan and the value. With owner-occupied premises, the business itself is the occupier, so lenders look at the strength of the business as well as the property. Valuers typically value the premises with vacant possession, as if the business were not there.
Some lenders are comfortable with trading-business premises, while others prefer let investments. On our panel, a few lenders state that they consider owner-occupied commercial property, and some offer bridges that convert to a longer-term loan with the same lender once the business can show the figures. Some limit owner-occupied cases to a sale exit or a refinance with their own term loan.
Common reasons to bridge
Commercial mortgages can take time, and they rely on accounts showing the business can afford the repayments. A bridge can help where:
- The purchase must complete quickly, for example at auction or from a motivated seller
- The business has grown recently and its latest accounts do not yet reflect it
- The premises need works before they can be occupied or valued properly
- The business is moving and needs to buy before selling its old premises
The exit is then a commercial mortgage once the conditions are met, or the sale of the old premises.
VAT, use class and title
Commercial property purchases can carry VAT if the seller has opted to tax. Unless the purchase can be treated as a transfer of a going concern, VAT may be payable on completion and reclaimed later, which affects how much you need to fund. Your accountant and solicitor should confirm the position early.
Lenders will also check the planning use class, any restrictions in the title, the lease if you are buying a leasehold, and environmental issues, particularly for industrial sites.
Arranging business premises bridging
We compare lenders on appetite for owner-occupied premises, loan to value, interest options and exit, then approach those that fit with a clear case. Instant Quotes gives indicative figures for commercial bridging as a starting point, and final terms depend on each lender's valuation and checks.
If you or your family will live in part of the property, such as a flat above a shop, the loan may be regulated depending on how much of the property is used as a home. We will tell you at the outset if that applies and how your case will be handled. Your home or property may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.
