Commercial Mortgages explained – The application process
Commercial Mortgages explained – A brief overview of the application process
I am often asked by my clients “what is the process from here” or “what do we need to give you to get this underway”. This is becoming such a common request that I though it’d be best to try and explain what lenders are looking for from clients from start to finish in the current commercial mortgage market in the UK when trying to obtain commercial finance.
Stage One – The initial enquiry
Here at first4commercial.com we have our own enquiry form this is the first stage in our application process, when looking to secure commercial finance for our clients. The completed enquiry form along with the last 3 years company accounts is normally enough to be able to secure a decision in principle from a panel lender. A decision in principle is exactly that, a lender has confirmed that based on the information supplied (but subject to full application) in principle they are happy to provide the finance requested.
Once we have a decision in principle secured from a lender we provide our clients with a full Heads of Terms Illustration, this breaks down exactly what the rates, fees and terms of the proposed mortgage will be making absolutely sure that there are no hidden costs or fees to the client. Everything carried out up to this stage is done so absolutely FREE of charge. So, if the client decides that the finance secured for them is too expensive they can decide not to proceed and not lose a penny.
Stage Two – The full application
Once our client has decided that the terms provided are satisfactory we ask them to sign the Heads of Terms Illustration to confirm they have read and understood it and also it doubles as our instructions to act for the client. Upon receipt of the signed terms we are able to provide the client with a comprehensive list of requirements from that specific lender in order to get the case to full offer as quickly as possible.
Most UK lenders will expect to have the following items before an offer can be issued:
Identification – Passport or Driving Licence
2 x Proof of address – Utility Bills etc
Last 3-6 months bank statements for the client
Possibly the last 3-6 months business bank statements if borrowing in a company name
Last 3 years full accounts for the business
Copy of any leases or tenancies – If an investment property
Plans, planning permission and a schedule of costs and works – If development loan
The above list is a guide only and is not exhaustive, different lenders will have different requirements.
Once we have collated all the relevant paperwork for a specific case this is submitted to the lenders underwriting team for approval and sign off. If all OK the next stage is to get a valuation instructed so that the lender has an independent appraisal of the security property(ies).
As long as there aren’t any issues raised in the valuation report and the property values at the level anticipated the case will be passed to the lenders credit team for final checks and offer to be issued.
Stage Three – Offer through to completion
Once an offer has been issued it is down to the lenders and clients solicitors to liaise with one another to get the relevant conditions satisfied and all final legal matters agreed. At this stage there is not a lot for us to do, we are always on hand if any issues arise or clients require anything explained to them that they are unsure of. If, however, this is a legal issue we will direct the client back to their solicitor as this is not our area of expertise.
Stage Four – Completion
Once both sets of solicitors have satisfied the lenders conditions in the mortgage offer and all legal searches etc have been completed, they will arrange for the exchange of contracts (if purchase) and/or the completion date to be set for transfer of funds from the mortgage lender to the solicitors account. Once funds have been received by the solicitor your property purchase can be completed and you own your property or if refinancing any existing charges/mortgages are paid off and the balance is transferred to you for the purpose to which you intended.
That’s the process as clearly as could be explained and as you will see this highlights the need to have a good Commercial Finance Broker in place to help guide you along the way. Our vast experience and knowledge will help prevent any unnecessary hiccups, ensuring a smooth transition though the mortgage process.
first4commercial.com Colchicums, The Vale, Stock, Ingatestone, Essex CM4 9PW
T: 01277 620083 F: 01277 658900 E: email@example.com