Commercial Mortgages.
Long-term finance for business premises and commercial investments.
A commercial mortgage is a loan taken out by a business to buy an existing or new property. There are two main types — an owner-occupier mortgage, used when a business is buying premises to trade from, and a commercial investment mortgage, used when a business is buying property as an investment.
Compared to residential lending, commercial mortgages typically require larger deposits and come with higher interest rates, reflecting the greater complexity and risk involved.
The two main types
Owner-occupier commercial mortgages are for businesses buying their own trading premises. Commercial investment mortgages are for purchasing property as an investment, often to let out to a third party — sometimes viewed as a commercial buy-to-let.
The option you choose will influence the finance structure, rates and terms available. Deposits generally range from 25% to 40%, although in some cases additional property with sufficient equity can be used as security. Most commercial mortgage rates are variable, with terms ranging from 3 to 40 years — 15–30 years being most common.
How to get a commercial mortgage
Lending is based on the ability of your business to make the repayments. You'll need to demonstrate affordability — often with a detailed business plan — and a professional valuation of the property will usually be required.
High-street banks offer commercial mortgages, though the most competitive terms may require moving your business banking. Specialist lenders can offer interest-only options and lower deposit requirements, but typically at higher rates. A broker can help you navigate the full market, including deals that are only accessible via intermediaries.
How much can I borrow?
For owner-occupied property, you'll generally find lending up to 70–75% LTV, subject to a rigorous affordability assessment. For a commercial investment mortgage, the amount borrowed is driven by the expected rental income and typically won't exceed 65% of the purchase price. Some deals allow lower deposits in exchange for additional security.
Commercial mortgage rates
Rates vary by lender and your specific circumstances, and are typically negotiated rather than fixed on a rate card. Lenders will examine the trading history, current position and future plans of the business before quoting — higher perceived risk equals higher rates.
Most rates are variable and often quoted as 'X% over base rate', similar to tracker mortgages in the residential sector. Fixed rates are available for investment mortgages but less common. 100% LTV deals are rare and expensive; a 20%+ deposit typically unlocks far better terms.
Why use a commercial mortgage broker
- 01Specialist knowledge of a complex and fragmented market
- 02Access to lenders and deals not available direct
- 03Case is packaged and presented professionally to underwriters
- 04Look for brokers that are members of the NACFB (National Association of Commercial Finance Brokers)
Typical fees
- 01Arrangement fees — usually 1–2% of the loan amount, added on completion
- 02Commitment fees — non-refundable, payable upfront with some lenders
- 03Valuation fees — typically more in-depth than residential valuations
- 04Legal fees — you'll usually pay your lender's costs as well as your own
- 05Broker fees — up to around 1% of the loan value
Ready to explore
commercial mortgages?
Speak to a qualified UK mortgage advisor today — tailored, transparent and whole-of-market.
FCA Reference Number: 953250