Commercial Mortgages
A quick overview of commercial mortgages
Commercial mortgages, also sometimes known as business mortgages, are used to purchase property or land for business use rather than residential purposes. Whether you are buying a trading premises for your own company or an investment property to let out to other businesses, you’ll need a commercial mortgage to finance the purchase.
Find out more about how these products work and how to apply in our guide to commercial mortgages.
How to get a commercial mortgage
Commercial mortgage applications are more bespoke than residential ones, as lenders assess the business’s strength, alongside the property. Here are the key steps to application:
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Prepare a business plan - You’ll need to demonstrate your industry experience and how the property will benefit your business or portfolio, as well as the business’ affordability
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Valuation and property assessment - A specialist surveyor will be required to evaluate the land and/or property value and its potential rental yield
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Financial assessment - Lenders will want to look at your business projections, as well as your past business accounts
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Speak to a commercial broker - commercial finance is much more complex than residential mortgages, so it’s a good idea to seek out help from an experienced commercial finance broker who will be able to help you build your application portfolio
Types of commercial mortgages
There is no one-size-fits-all commercial loan. The type you need depends on how you intend to use the property and the industry you operate in.
This table shows which types of commercial mortgage are used for different business needs and types/.
|
Loan Type |
Purpose |
|
Owner-Occupier |
For businesses buying a premises to trade from such as offices, shops and warehouses, lenders look at business profits (EBITDA) to prove affordability. |
|
Commercial Investment |
For landlords purchasing property to let to other businesses. Affordability is based on the Interest Coverage Ratio (ICR) of the rental income |
|
Semi-Commercial |
For mixed-use properties, such as a shop with a flat above. These often require specialist lenders who understand both commercial and residential risks |
|
Specialist sectors |
Mortgages for specific commercial sectors like factories, hotels, or care homes often require sector-specific experience, so lenders will ask for evidence of this on application |
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FAQs
Typically, at least 25% to 40%, although some owner-occupier deals might be available with a 20% deposit. In some cases, you can borrow 100% if you provide additional asset-based security, such as other property.
Get expert commercial mortgage advice
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.
IF YOU ARE THINKING OF CONSOLIDATING EXISTING BORROWING YOU SHOULD BE AWARE THAT YOU MAY BE EXTENDING THE TERMS OF THE DEBT AND INCREASING THE TOTAL AMOUNT YOU REPAY.
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