Repayment Methods

Repayment Methods

There are a number of different repayment methods which can be set up for a mortgage to enable a business to purchase a commercial premises. Here we have outlined the most common payment profiles:

Equal repayment: Your monthly payment will not fluctuate, and you will be paying off a mixture of capital and interest over the commercial mortgage term.

Equal repayment and balloon repayment: This is a mixture of equal interest repayments, then a final payment at the end of the proposed term. This will typically be a larger lump sum, and it may be possible to refinance the balloon payment if you do not have the cash to meet this repayment at the proposed time. This enables a business to retain a larger amount of cash throughout the period, as the effective amount being financed is reduced (interest may still be charged on the balloon). This can enable a business to use the cash flow for the short term, and enable them to grow their business. It is important to remember that you will be obliged to meet the repayment at the end of the term.

Interest only repayments and balloon repayment: Payments over the primary term will be made up of only interest. At the end of the term, then you will be required to make a balloon repayment as previously. This will reduce the repayments which the business will need to make over the primary term, with a reduction in the cash flow required. This will increase the amount of interest which is paid compared to equal repayment and balloon repayments.

Endowment Mortgage: Similar to an interest only commercial mortgage, the repayment of the capital element of the mortgage will be payable from an endowment policy. There are a number of different endowment policies which may be appropriate for this type of mortgage, including life assurance policy, personal or executive pension plan policy, or finally a personal equity plan. Due to nature of the structure, endowment mortgages, will normally command a lower interest rate.

We can provide bespoke payment requirements for specific arrangements, please contact us using the details provided for further information.

If you would like a quotation or a general conversation regarding your businesses funding requirements: Click Here To Contact Us

Providing our clients with:

✓ Great rates of funding

✓ Professional discreet service

✓ Quick decisions

✓ Broad panel of lenders