In the not so distant past the term “buy to let commercial mortgage” would have been synonymous with “residential commercial mortgage”. This is because many lenders and brokers regarded buy to let mortgages as commercial propositions.

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Many property investors now consider a good mix of residential and commercial property to be a requirement of a well managed portfolio. This change in demand has forced the market to adapt, buy to let commercial mortgages are now one of the fastest areas of commercial lending.
Looking across the broad spectrum of commercial investment property, the main types of buy to let commercial mortgage products can be defined generally under the headings ‘blue chip’, ‘premium’, ’secondary’ and ’speculative’.
Blue Chip investments have all the qualities a lender would hope to see in a commercial deal. The proposition has to have good quality property in the right location and stable tenants on a solid lease. This quality of commercial investment acts as a double edged sword though. High demand from institutional investors can inflate the prices, which in turn can reduce rental yields causing potential problems for investors supporting higher loan-to-value buy to let commercial mortgages.
The step down from the blue chip investment would be the “premium” investment. One would expect the premium property to perhaps have a tenant without the credentials of a blue chip property. The property itself would most likely still be of the highest standard and in a good location. Because these investments are not so desirable to the institutional investors the prices are a better reflection of their true value. This lower capital cost makes the proposition attractive to a wider variety of lenders.
When it comes to ‘Premium’ buy to let commercial mortgages lenders begin to become much more focused on the experience and financial standing of the investor. For example, will the borrowing costs still be paid in the event of the tenant defaulting? this is particularly important and the valuer may well be asked to comment on the likelihood or otherwise of finding good tenants quickly and easily. Due to this perception of risk, a lender will also be interested in verifying the stability and reliability of the tenant(s).
Not surprisingly, speculative investments are the hardest to fund. Very often the property is not pre-let, may be in need of repair or refurbishment and may not even be in a good location. For these reasons a lender will expect the borrower to have the means to support the buy to let commercial mortgage from Day One - and evidence of this will usually be required.
Whilst competition within the “secondary” investment market is helping to bring prices of a buy to let commercial mortgage down the speculative market is still very selective. Blue Chip investments tend to be funded by the banks and building societies who reward good investments with the lowest interest rates and most favourable terms.
Commercial property investment represents a fantastic opportunity for small and large investors. As it becomes easier to arrange a buy to let commercial mortgage it is inevitable that this market will grow.

Spectrum Business Finance are buy to let commercial mortgage specialists and have been arranging for commercial property finance for over 5 years. When you talk to an experienced commercial finance broker you can be sure to get the right deal for your circumstances.