Commercial mortgages: An opportunity for 2008

Commercial mortgages: An opportunity for 2008


Danny Churchill, Director Commercial 1.

The commercial market has a very strong outlook for 2008 – the sector has been growing steadily over the last 18 months with all indications that it is set to grow further this year. As residential mortgages start to suffer from the impact of the credit crunch, commercial property becomes more attractive to investors and offers an opportunity to make some very good returns over the long-term.

One of the prevalent trends evident in 2007 was the increase in investors and professional landlords diversifying from previous successful transactions in the buy-to-let market and adding to their portfolios with commercial property. The objective was to take advantage of the additional security offered by tenants on long-term leases and stronger capital appreciation. This trend is set to continue.

Diversification for brokers in the current economic climate is a key consideration when looking to find and exploit new income streams. Commercial mortgages represent a good long-term business opportunity and it is a shrewd move to be more proactive within the commercial market to service a growing customer need. There are many opportunities for brokers to actively approach their clients, for example, by asking their residential self-employed customers about their needs for a commercial mortgage and what rate they currently pay, exploring avenues for entrance into the commercial remortgage market as well purchases.

As the commercial market can be more complex in terms of valuations and issues over the status of the business making the application, it is vital that brokers empower themselves with the knowledge and the right partnership.

So, as commercial mortgages are a different animal to residential mortgages, where should a broker start? The commercial market has evolved greatly over the past five years, with companies like Commercial First, one of the pioneers in this sector, and the team here at Commercial 1, who have worked hard to demystify the commercial finance process. The emergence of specialist lenders has energised brokers by broadening the range of products available and the speed with which deals can be completed.

Brokers or advisers who have a client interested in commercial mortgages no longer have to risk losing them to a specialist. Approaching a packager is your best bet as they have various lenders in their armoury and can handle the whole process for you. At Commercial 1 for example, our independence allows us to access a broad range of lenders, from High Street banks such as RBS, Natwest and Alliance & Leicester, to more specialist lenders such as Commercial First, Interbay and Base – ensuring the best possible deal for your client, even if they are non-conforming or have adverse credit issues.

Packagers take care of the whole process from start to finish. They organise the funding, liase with the solicitors of both the client and the lender, the surveyors and the customer, and make the process very simple for all concerned. While the commercial market has been simplified over the last few years, there are still some more complicated cases, but as commercial packagers are experts in the sector they ensure the process remains a smooth one.

Alongside commercial mortgages, bridging finance is also growing in popularity, as it can be secured on all types of residential, commercial and semi-commercial property on a first or second charge basis. Bridging finance is a short-term funding solution to inject immediate liquidity into property transactions that would otherwise fall through without this solution. It is also used for capital raising, land acquisition, renovations and avoiding bankruptcy. Immediacy is the driving factor with these deals, and a good packager can organise funds within four working days.

The advice for brokers is clear, don’t be afraid of commercial mortgages, go through a packager to organise the whole process. Most commercial packagers work solely in the commercial mortgage market, and don’t cross-sell. So a broker can introduce a client and they will only deal with that commercial mortgage enquiry. At Commercial 1 we go one step further, ensuring the broker continues to receive a referral fee, even if the client comes to us directly at a later date. This forms part of our strong commitment to building long standing relationships with both our introducers and lenders, ensuring we provide the best customer service and turnaround times.

Commercial mortgages could be the missing link for many brokers. With 2008 set to be the year of commercial, now is the time to diversify and maximise business opportunities. Partnership with a specialist packager will offer access to detailed market knowledge and expert back office support necessary to ensure a smooth and efficient process, allowing brokers the ability to offer the best possible service to clients.


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