Commercial mortgage costs include fees and interest payments that vary according to the lender you choose.

Once an "in-principle" commercial mortgage offer has been made by a lender there will be some initial "up front" fees that need to be paid. These will cover the lenders costs should the mortgage application eventually be declined. These fees are to cover the cost of any property valuation and solicitors costs.

The next fee is payable on successful completion of the mortgage and could be added to the loan if required. This fee may be referred to as an "arrangement fee", "a completion fee" or "processing fee" and usually costs between 0.5% and 2.5% of the loan.

The ongoing cost of a commercial mortgage is the "interest charge" from which the monthly repayment is worked out. The interest charged via a bank usually falls in the range of bank base rate plus 1.5% upwards to a margin of even 7%. Sub-prime lenders will charge more, sometimes much more!

Finally a commercial mortgage could be subject to a "redemption fee" ("exit fee"). Some lenders may charge this fee no matter when the mortgage is redeemed. Some may only charge this fee where the mortgage has run for less than 3 or 5 years. In this case the fee could be referred to as an "early redemption penalty" or "early redemption charge".

You and your solicitor should always check the terms of any offer so that you are aware of all mortgage charges as a low interest rate may not equate to lowest overall cost!