Business mortgage: Business mortgage for business premises

Buying a business property is a smart investment and is often cheaper than renting a business property for a longer period of time. But how does that actually work with a business mortgage? How is it determined how much you can borrow? What is a good yet affordable mortgage? Did you know that there is a difference between a business mortgage with a bank and property financing by a specialized mortgage bank? What do you really need to know when you want to take out a business mortgage?

Why would you choose to buy a commercial property?

Buying a commercial property is investing in the increase in value of the property. When the market picks up, the commercial property becomes more valuable and you are therefore building up capital. The situation is therefore not that different from that for private individuals in the housing market. Even as a private individual, it is better to buy than to rent, if you can afford it. Buying is usually cheaper than renting. You pay lower monthly costs than when renting, and the business premises are really yours at the end of the mortgage term. A third and final advantage is that you can depreciate a business property, which is of course not the case with a rented business property. Please keep in mind that you cannot write off more than half of the property’s WOZ value.

How do you choose a commercial mortgage or commercial mortgage?

If you choose to purchase a commercial property, you will have to take out a mortgage loan to finance the property. But how do you know what kind of commercial mortgage suits your company and individual situation? There are different types of mortgages available for entrepreneurs, each with their own advantages and disadvantages. Depending on your situation and that of your company, you choose financing that is safe and yet ensures that you can achieve your business objectives. Deciding what type of financing this is is slightly more complicated than is the case with a private mortgage. To get started, you can choose whether you finance the property personally or whether you purchase it through your company. In terms of financing, it does not make much difference, but from a tax perspective there may be some differences in terms of the deductibility of mortgage costs. So carefully consider which option is the most favorable for you. In addition, there are two options for financing via a business mortgage:

  • A business mortgage with your own bank or other financial institution
  • A commercial mortgage through a specialized mortgage bank (object financing)

With a business mortgage through a bank, we mainly look at how your company is doing in practice. You are therefore asked for annual figures for the past years. The business interest also depends largely on how healthy your company is. In general, the interest rate is approximately one percent higher than with a private mortgage. The bank will prefer to arrange all your financial affairs and will therefore also be happy to arrange your business mortgage, but this can be either to your advantage or to your disadvantage. With property financing through a specialized mortgage bank, the focus is not so much on your company, but rather on the business premises itself. A valuation report is very important and the financing here depends more on the value of the business premises than on you as a debtor. Recently, the interest rate here has been lower than at traditional banks and it also gives you more freedom as an entrepreneur to be able to refinance with another bank later if you would like to switch. Which method of financing is best really depends on your personal and business situation. You must therefore be informed by several parties in order to make a good choice for financing that suits you.

How do I proceed to arrange that business mortgage or entrepreneurial mortgage?

Because determining the right form of financing for your company is not that easy, it is advisable to always be guided by both a broker and an accountant. The real estate agent specializes in everything related to the value and properties of the property. A valuation report can also be drawn up in this way, if this is necessary for concluding the commercial mortgage. The accountant can assess how financing can best take place: Is it smarter to finance personally or through the company? What do the annual figures look like? In any case, make sure that you consider traditional mortgage financing through your own bank or another bank, but also investigate the options for property financing through a specialized mortgage bank. Don’t let your current bank restrict you, which of course would like to take care of all your business financial affairs. Make sure you spread out where you put things, if this means a more suitable or cheaper business mortgage. Research well with different banks, building societies and other financial institutions and always be guided by both your accountant and a real estate agent.