Commercial Mortgage Remortgage: When to Switch
A commercial mortgage remortgage replaces an existing loan on a business property with a new one, either with the same lender (a product transfer) or a different one (a full remortgage). Businesses do it to escape an expiring fixed rate, release equity from a revalued property, or fix problems with the current facility.
What is a commercial mortgage remortgage?
A commercial mortgage remortgage is the process of replacing the loan secured against a business property, either by moving to a new lender or by agreeing new terms with the existing one, once the current deal ends or no longer suits the business.
It differs from a first-time commercial mortgage application in one key respect: the property already has a charge registered against it, so the new lender's solicitors must handle the redemption of the old loan alongside setting up the new one. The business isn't buying the property again; it's replacing the finance sitting behind it. This applies to owner-occupied premises and commercial investment property alike, and to limited companies, LLPs and qualifying partnerships.
When does remortgaging make sense?
Remortgaging tends to make sense at three points: when a fixed or discounted rate period is ending, when the property has increased in value and the business wants to release some of that equity, or when the current lender can't support what the business now needs.
A change in circumstances also drives it: a business that has grown its turnover, cleared adverse credit history, or improved its trading performance since the original mortgage was arranged may now qualify for better terms elsewhere. Conversely, a business under pressure from its current lender, perhaps facing a facility review or a covenant breach, may remortgage specifically to move away from that lender's terms. It rarely makes sense purely to chase a marginal rate difference once fees and exit charges are accounted for.
Early repayment charges and fixed-rate expiry
Early repayment charges apply when a business exits a commercial mortgage before the end of a fixed or discounted period, and they can be significant enough to outweigh the benefit of switching, so the existing loan documentation needs checking before anything else.
Most commercial mortgages carry reducing early repayment charges through the fixed period, often expressed as a percentage of the outstanding balance that steps down each year. Some products remove the charge entirely once the fixed period ends and the loan moves to a variable rate, which is usually the cleanest point to remortgage.
A broker or the existing lender's redemption statement will confirm the exact figure. Where a charge does apply, the sums only work if the savings from the new deal exceed it within a reasonable payback period.
What a lender needs to remortgage a commercial property
A remortgage lender needs broadly the same information as a new purchase: company accounts, management information, a redemption statement from the existing lender, and a fresh valuation of the property, because the loan is priced against what the security is worth today, not what it was worth when it was first mortgaged.
Additional documents specific to a remortgage include the existing mortgage deed or charge details, confirmation of the outstanding balance, and evidence of why the switch is being made if the business is moving away from its current lender under pressure. Businesses with straightforward accounts and no missed payments on the existing facility move through underwriting fastest; those with recent adverse history will still be considered but on a smaller lender panel.
Product transfer vs full remortgage
A product transfer keeps the loan with the existing lender and simply moves it onto a new rate, avoiding legal work and a new valuation, while a full remortgage moves the loan to a different lender and can unlock a better rate, a higher loan amount, or terms the current lender won't offer.
A product transfer is usually quicker and cheaper because there's no redemption and no new charge to register, but the business is limited to whatever the existing lender is prepared to offer, which may not be competitive. A full remortgage takes longer and carries legal and valuation costs, but opens the whole market, including specialist lenders who will look at cases a mainstream bank has become unwilling to continue funding.
How long does a commercial remortgage take?
A commercial mortgage remortgage typically takes six to twelve weeks from application to completion, similar to a first-time purchase, because a full valuation and legal work are still required even though the property isn't changing hands.
Timing matters most around a fixed-rate expiry date: applying two to three months ahead avoids a period on the lender's default variable rate, which is usually its most expensive rate. A product transfer with the existing lender can often complete faster, sometimes within a few weeks, because it skips the valuation and legal redemption steps, which is one reason businesses under time pressure choose it even when the rate isn't the cheapest available.
| Factor | Product transfer | Full remortgage |
|---|---|---|
| Lender | Stays with existing lender | Moves to a new lender |
| New valuation required | Usually no | Yes |
| Legal work | Minimal or none | Full conveyancing and charge registration |
| Typical timescale | A few weeks | Six to twelve weeks |
| Rate choice | Limited to existing lender's range | Whole of market, including specialist lenders |
| Best suited to | Straightforward cases wanting speed | Cases needing a better rate, more funds, or a lender change |
Step-by-step
- Check the existing mortgage deed for early repayment charges and when the fixed or discounted period ends
- Request a redemption statement from the current lender showing the exact balance to be cleared
- Get an up-to-date valuation of the property to establish how much equity is available
- Compare product transfer terms from the existing lender against full remortgage terms elsewhere
- Submit accounts, management information and the redemption statement to the chosen lender
- Instruct solicitors to handle the legal redemption and registration of the new charge
- Complete and confirm the old facility has been formally redeemed
Illustrative example
A limited company had a five-year fixed commercial mortgage on its warehouse due to expire, after which the loan would move to the lender's default variable rate. The business requested a redemption statement, confirmed no early repayment charge applied once the fixed term ended, and obtained an updated valuation showing the property had risen in value. It remortgaged to a new lender at a lower rate and released some equity for working capital.
Frequently asked questions
Can a business remortgage a commercial property with adverse credit?
Yes, though the lender panel narrows. Mainstream banks are more cautious about remortgaging a business with recent missed payments, CCJs or a recent restructure, but specialist commercial mortgage lenders assess these cases individually, usually pricing for the additional risk rather than declining outright.
Is a revaluation always needed for a commercial remortgage?
A full remortgage to a new lender almost always requires a fresh valuation, since the new lender is pricing and securing the loan against the property's current worth. A product transfer with the existing lender often doesn't require one, which is part of why it tends to be quicker.
What happens if a business remortgages during a fixed-rate period?
Exiting a fixed-rate commercial mortgage early usually triggers an early repayment charge, calculated as a percentage of the outstanding balance that typically reduces each year through the fixed term. This charge needs to be weighed against the savings from switching before deciding to proceed.
Can a commercial mortgage remortgage release equity for other business uses?
Yes, if the property has increased in value or the loan has been paid down, a remortgage can release some of that equity as cash, commonly used for working capital, further investment, or repaying more expensive short-term borrowing. The amount released depends on the lender's maximum loan-to-value for the property type.
Does an LLP or partnership need different documents to remortgage than a limited company?
The core requirements are similar: accounts, a redemption statement and a valuation. LLPs and partnerships with four or more partners typically also provide partnership agreements or deeds and confirm the entity's authority to grant the new charge, alongside the same trading and financial information a lender would ask a limited company for.
By Adam Parker. Last updated: .