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18 Dec 2023

Your step-by-step guide to commercial remortgaging

Tansy Dando
Wealth and Business Writer

Are you thinking about refinancing your commercial property but feel overwhelmed by the complexity? You're not alone — but don’t worry, we're here to break down the process into simple, manageable steps. Navigating the world of property remortgage — whether it’s domestic or commercial — can be tricky. 

But with the right mortgage broker, you'll be on your way to securing favourable commercial mortgage rates in no time. Why settle for less when you can have the best advice at your fingertips? 

What is remortgaging?

Have you ever wondered what remortgaging entails? In essence, it's the process of switching your current mortgage to a new one, potentially with a different lender or under different terms.

Both homeowners and business owners can go through the process of remortgaging, and when it comes to commercial remortgaging, the search is about more than just getting a better deal. It's about strategically enhancing your business property's financial position, too — whether that's for a charming boutique or a dynamic office block. 

Think of commercial remortgaging as a financial renovation for your property, offering potential benefits like reduced repayment amounts or freeing up some of the capital tied up in your property. However, it's crucial to stay aware of the extra fees and legal considerations that come along. By understanding the entire scope, you're empowered to make a well-informed decision for your business's future.

Why consider commercial remortgaging?

Commercial remortgaging can be a smart business strategy — a well-timed remortgage could mean lower interest rates, resulting in smaller monthly payments and a cash flow boost. 

If your property's value has gone up, there could be hidden cash tied up in it. Remortgaging can tap into this extra equity, giving you a handy cash injection for all sorts of exciting business moves. Think upgrading your space, launching new products, or even kicking off a whole new business venture.

And how about getting your mortgage terms to fit your business today? Your business is growing and changing — shouldn't your mortgage do the same? A remortgage can align your repayments with your current situation, making your financial life a bit more comfortable.

Successfully managing a remortgage also shows lenders you're not just in the game – you're playing to win. It's about showing off your business savvy and setting yourself up for even more exciting financial opportunities down the road.

But where to start? The essential step is to evaluate your existing mortgage agreement, assess the current market value of your property, and review your business's financial standing. It's akin to conducting a thorough financial health check for your business – with the potential to emerge more financially robust! 

Seeking advice from a mortgage broker can be incredibly beneficial. They can provide invaluable insights and guidance, ensuring you make a decision that's not just good, but great for your business. We’ll look at this in more depth later on.

What is the average interest rate for a commercial mortgage?

Let's delve into the specifics — particularly, the average interest rates for commercial mortgages in the UK. As with all mortgages, there’s no single figure. Property is a fluctuating market and interest rates change frequently.

Commercial mortgage rates do, however, tend to be higher than those for residential mortgages, reflecting the varied risks involved. You can expect rates to range typically between 3% and 6%, although this can vary widely based on your business's unique circumstances and financial profile. Some can go as high as 18%. 

But the commercial mortgage you choose shouldn’t just be based on the lowest rate — you need to consider the complete package. Are you going for a fixed-rate or a variable-rate mortgage? What about the long-term costs and implications? All these factors are crucial in your decision-making process and the ideal rate is the one that perfectly aligns with your business objectives and future projections, ensuring a sound financial footing for your venture.

Need advice? The expertise of a commercial mortgage advisor can be invaluable. They can navigate the complex array of rates and offers to pinpoint the perfect match for your business needs. 

Your step-by-step guide to commercial remortgaging

Commercial remortgaging can seem daunting, but breaking it down into manageable steps makes the process more approachable and less overwhelming. This step-by-step guide will walk you through the entire process.

1. Assessing your current situation

The first step in commercial remortgaging is to take a comprehensive look at your current mortgage and overall business financial situation. Ask yourself why you're considering remortgaging. Is it for better rates, to release equity, or to consolidate debts? Understanding your motives will guide your decisions throughout the process.

2. Evaluating your property

The next step is to have your commercial property evaluated. The current market value of your property will significantly influence the terms and conditions you can secure for your new mortgage. It’s important to have a realistic idea of your property's worth in the current market.

3. Researching the market – with help from a mortgage broker

Now, dive into the market research. This is where commercial mortgage comparison plays a crucial role. Compare different lenders and the rates they offer. Look beyond just the interest rates; consider factors like terms of the loan, repayment flexibility, and any associated fees. Utilising online comparison tools can simplify this process and help you make an informed decision.

If you find the search a bit overwhelming, why not seek advice from a mortgage broker? These professionals can offer insights into the best deals available and can often negotiate better terms on your behalf, thanks to their industry knowledge and connections.

4. Preparing your financial documents

Gather and prepare all necessary financial documentation. Lenders will want to see detailed business accounts, proof of income, business plans, and possibly cash flow forecasts. The more thorough and organised your documentation, the smoother the application process will be.

5. Approaching lenders and applying

With your documents in hand, it’s time to approach lenders. Your research and advice from your advisor will guide you to the best candidates. When applying, be thorough and transparent with your information to avoid any delays or issues.

6. Considering the offers

Once you have offers from lenders, it’s time to compare them. Don’t rush this process. Analyse each offer carefully, considering the interest rate, the term of the mortgage, any fees, and other terms and conditions. This is where your earlier commercial mortgage comparison efforts pay off, allowing you to recognise the best offer for your situation.

7. Getting a solicitor involved

After choosing a lender, you’ll need to involve a solicitor. They will handle the legal aspects of the remortgage process, including property valuation, checking the property title, and liaising with the lender on your behalf.

8. Finalising the offer

After your solicitor completes their checks and you’re happy with the offer, it's time to finalise it. This will involve signing contracts and agreeing on a completion date when the funds will be released and your old mortgage paid off.

9. Completion

On the completion date, your new mortgage will officially begin, and your previous mortgage will be paid off with the funds from the new mortgage. Your solicitor will handle the transfer of funds.

10. Aftercare

Finally, keep an eye on the market even after you’ve remortgaged. Circumstances and rates can change, and you might find opportunities to renegotiate or find a better deal in the future.

By following these steps and continually engaging in commercial mortgage comparison, you can navigate the commercial remortgaging process with confidence and secure the best possible terms for your business.

Find the right remortgaging deal for your business with SpotDif

Now you know how to remortgage a commercial property, why not get the ball rolling? With SpotDif, you can search for an array of goods and services — including remortgaging deals. We’ll help you find the right option for your business, at the best price. Search and compare remortgaging deals and mortgage brokers today. 

If you have any questions, please feel free to get in touch with our friendly team.

Tansy Dando
Wealth and Business Writer
I aim to bring clarity to the complex sectors of wealth and business with researched content designed to help you make the best financial decisions for your needs.
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