Five Commercial Mortgage Expenses To Watch Out For
Five Commercial Mortgage Expenses To Watch Out For
Taking out a commercial mortgage is not always quite so straight forward as many may believe. There are a few things that you need to think about beforehand, and in this article we look into the costs involved with entering into a commercial mortgage contract.Buying commercial property requires careful consideration of the various costs involved. Not only will you have to put down a significant deposit (typically between 25 and 50 per cent of the purchase price) but you will also have to budget for the other charges involved in a property purchase. Our guide highlights five of the most common charges and fees that you will encounter when you are buying commercial premises for your business.Arrangement or Booking Fees: As with a residential mortgage, you will generally pay an arrangement or booking fee for your commercial mortgage. These fees typically range from 0.5 to 1.5 per cent of the commercial mortgage amount. Some lenders will allow you to add the fee to the loan whilst others will require it up front. Often, you will find that the exact fee you pay will be determined by a process of negotiation and the eventual structure and interest rate of the commercial mortgage.The Valuation Fee: The first stage of the buying process will see the need for a valuation from yourself and the lender to make sure the property is worth the price and make sure the mortgage is set at the right level also. It will fall to you to pay for the cost of the valuation though again there is a chance it can served, depending on the purchase price and value in the first place.Don't discount the need for a thorough structural survey by a conveyor, wither you or the lender could demand this to ease any fears of what the valuation brought up, especially if it is an older building. Obviously this will send the costs of the valuation fee skywards and to be 110% sure you might need/want to get two surveys conducted by separate conveyors.Fees for Professional Services and Conveyancing: When you buy a commercial property, conveyancing would need to be done by a solicitor to deal with the legal paperwork. There may be other professional fees that you will need to pay and so you will need to look into this thoroughly before starting the process.Early Repayment Charges: Property owners, both residential and commercial, dream of the day that their mortgage is repaid. However, there are penalties attached to the repayment of mortgages before the full term of the loan has passed. These charges are payable if you repay your commercial mortgage early - normally within the first three to five years of the mortgage having been taken out. It is important when you take out a commercial mortgage that you make sure you know whether you will be liable for any penalties for early repayment and how long these apply for.Broker fees: A mortgage broker can be a very useful service to employ when you are looking for the best deal, but as with all services, there is a price tag attached. Approaching a broker is a good idea because often they have access to rates that are not available on the high street, but many will charge a fee for their services.Stamp Duty Land Tax: Stamp duty is the tax paid on buying property and land in the UK, and the cost ranges from zero to 1% of the property value, depending on which price band it falls into.When you are working out the cost effectiveness of your development plan, and the relative cost of purchasing property, don't leave additional costs off the balance sheet. It is tempting to make a deal look better than it actually is by leaving certain costs to one side. This is a false economy and won't help you to fully judge whether a commercial purchase is right for you.