How to Compare Commercial Mortgage Rates

How to Compare Commercial Mortgage Rates

by David Redmond on 21 Jan, 2011

Commercial loans are little different from personal loans. However, they can only be taken out to finance commercial properties for business purposes. Just as with a personal mortgage, it is highly advisable to shop around for different rates before committing to anything. After all, it will make a significant difference to your business outgoings.

Interest Rates

Commerical mortgages come in two flavours: fixed rate and variable. The advantages of fixed rate are that you have stability in terms of your interest payments, and are protected against rises in interest rates in the wider market.

Variable mortgages will change along with the lender’s preferred rate, and so may go higher or lower depending on the Bank of England base rate. While the base rate is low, the interest will be lower.

The interest rate you are given will depend partially on the risk you represent to the lender. The healthier your business, the better rate you will receive as you represent a lower risk to the mortgage company.

Comparison

Spend some time shopping around on-line. There are plenty of comparison sites to speed up the process. Whilst doing so, pay attention to the range of rates available and the periods that they specify.

Make sure you’re aware of current market conditions and the current Bank of England base rate. It could make an enormous difference over whether you choose a fixed rate or variable rate commercial mortgage. For example, while the base rate is low, it would be a good idea to take a fixed rate as this will keep interest rates low until the agreed switch to variable (most fixed rate mortgages will switch to variable after an agreed period).

However, if the base rate is high, you may be tying yourself into needlessly high interest payments for longer than necessary.

Take your time, know your market, and don’t commit to anything on the spot.

About the Author

David Redmond


David Redmond is a Partner of Don Gilliard Finance Group. He is a fee-only, independent financial advisor and financial planner. For over 15 years, he has been helping individual investors and their families realize their investment goals.