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Commercial loan v. BTL mortgage

THE QUESTION

What the difference is between a commercial loan and a regular BTL mortgage is and what are the pros and cons?

THE ANSWER

BTL mortgages are usually where you start, commercial mortgages are usually where you end up. If you are just starting BTL lenders are your natural choice. Generically, the differences are as below.

BTL lenders have many tick box criteria, commercial have many less.

BTL lenders ideal borrower is:

  • Employed
  • Earning £25k+ pa
  • Owns only a few properties
  • Is willing and able to put down a 25% deposit which is their own (not anyone else's) cash and happy to leave it in the deal.

Their ideal property is a single let, max 5 bedrooms. They are happy to lend to first time landlords, but almost none lend to first time borrowers.

Commercial lenders are happy to lend to full-time landlords, but not exclusively so.

  • They don’t lend to first time landlords, minimum 12 months letting experience is required.
  • They lend on all the properties BTL lenders won’t lend on, as well as the ones they will.
  • Their rates are higher but not massively so.

There are far fewer commercial lenders in the market than BTL lenders and commercial lenders are much less forgiving to early redeemers.

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