Retail Mortgages

If you’re looking to purchase a shop or retail premises, securing the right type of finance is a key part of the process. Commercial property lending works differently from other mortgages - with more complex underwriting, bespoke pricing, and fewer lenders to choose from.

Here, we explain how commercial mortgages for shops and retail units work, who can apply, how lenders assess applications, what rates to expect, and where to find the best deal for your business.

Are there specific mortgages for buying retail properties?

Yes, retail properties are typically financed using commercial mortgages, rather than standard residential home loans or buy-to-let (BTL) mortgages.

A mortgage for a shop or retail unit is designed for businesses or investors purchasing property, such as:

• High street shops

• Retail units in shopping centres

• Mixed-use properties (like a shop with a flat above it)

• Restaurants, cafés, or salons

These mortgages are usually assessed based on a combination of your personal financial position, the business’s performance (if applicable), and the property itself.

Eligibility criteria for retail mortgages

Lending criteria for retail mortgages can vary significantly depending on the lender and the type of property you’re buying, but common requirements include:

• Deposit: Most commercial mortgage lenders require a deposit of around 20% to 40%, though this can vary based on perceived risk and property type.

• Business financials: Lenders will assess your trading history, turnover, and profitability (typically looking 1 to 3 years’ worth of results). Most lenders will review your earnings before interest, taxes, depreciation, and amortisation (EBITDA).

• Rental income (for investors): If the property is being let, lenders will consider the expected rental income and whether it comfortably covers the mortgage payments.

• Credit profile: Both your personal and business credit history may be reviewed, particularly for smaller businesses or sole traders.

• Experience: Some lenders prefer applicants with prior experience in retail, investment property, or another type of business ownership. It’s important to have a solid business plan prepared.

• Property type and location: Retail units in strong, high-demand locations are generally easier to finance than those in declining high streets or niche markets.

How to get a mortgage to buy a retail premises

Getting a mortgage for a shop or retail unit follows a similar process to other commercial lending, but with additional emphasis on business viability and property suitability:

1. Speak with a broker: Because commercial lending criteria can vary widely, the best approach is to speak with an experienced commercial mortgage broker who understands the retail property market. They can identify lenders that are comfortable with your type of business, property, and financial profile.

2. Compare your options: Your broker will review your deposit, financials, business performance (if applicable), and the property details. They’ll then compare lenders across the market and introduce you to the best options for a suitable retail mortgage.

3. Submit your application: Once a lender is selected, the application will typically involve detailed financial checks, a valuation of the retail property, and loan underwriting. If approved, the lender will issue a formal offer outlining the terms, including interest rate, repayment structure, and any conditions.

If you’d like to explore retail mortgage options or compare lenders based on your specific circumstances, you can get started here.

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Popular UK mortgage lenders for shops and retail units

Here are some examples of popular mainstream UK lenders and how they approach commercial retail and shop mortgages:

• NatWest: Commercial mortgages for shops and retail units have a maximum term of 25 years. You can borrow from £25,001 to £10 million on a fixed interest rate, with no upper limit on a variable interest rate with NatWest.

• Barclays: You can fix your interest rate for up to 10 years with a Barclays commercial mortgage. The minimum amount you can borrow is £25,000, and the maximum term is 25 years. However, prepayment fees may apply if you repay all or part of your loan before the expiry of the agreed term.

• Shawbrook: More of a specialist lender, with a Shawbrook commercial mortgage for retail property, they can be more flexible in certain situations. You could potentially borrow between £150,000 and £35 million, with 2-, 3-, 5-, and 10-year fixed rates available.

Commercial mortgages are created on a bespoke basis, so it’s crucial to shop around, speak to specialist lenders, and ultimately, be introduced to the lender that can tailor the loan to your specific circumstances and needs.

What interest rate to expect

Interest rates for retail mortgages are typically higher than those for residential mortgages, reflecting the increased risk associated with commercial property. As a rough guide:

• Rates are often slightly higher than the current average residential rates, but specific figures depend on the lender and market conditions.

• Strong applications with low LTVs and solid business financials may be able to secure more competitive rates.

• Higher-risk cases (for example, new businesses or unusual properties) may attract higher rates, which is why it’s important to approach the right lender.

Interest rates on mortgages for shops and retail units can usually be structured as:

• Fixed rates for a set period

• Variable or tracker rates linked to the underlying base rate

• Bespoke pricing (depending on the deal)

Because commercial rates are usually tailored to each business, it’s important to compare all your options across all available lenders.

Types of insurance to consider

When taking out a mortgage on a retail property, lenders will usually require certain types of insurance, and others aren’t legally required but are strongly recommended:

• Buildings insurance: Covers the property's structure and is typically required for commercial mortgage approval.

• Contents insurance: Protects stock, equipment, and fixtures inside the premises.

• Public liability insurance: Important for retail businesses where customers visit the premises.

• Employer’s liability insurance: If you’ll be employing people to work in the shop, this helps cover claims for work-related illnesses or injuries.

• Business protection insurance: Covers lost income if your business cannot operate or is harmed due to an insured event.

• Glass insurance: If your shop or retail unit has a glass front, this specialised policy can be helpful in the event of accidental or malicious damage.

• Landlord insurance (if applicable): If you’re letting part of the property (perhaps a flat above a shop), this can cover rental income and tenant-related risks.

How can I learn more?

As a whole of market broker, our team have access to more than 20,000 mortgage deals, including those offered by lenders specialising in retail finance. Get started today, and we promise to make your mortgage journey as stress-free and straightforward as possible. 

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Why choose Money Helpdesk for your shop or retail unit mortgage?

Setting up commercial mortgages for shops and retail units can be more complex than residential lending, with stricter criteria and fewer, more specialist lenders to choose from.

Here’s why businesses and investors across the UK use Money Helpdesk when arranging finance for a commercial retail property:

• Access to experienced commercial mortgage advisors

• Whole-of-market comparisons across high street and specialist lenders

• Support with complex cases, including mixed-use and non-standard properties

• Free initial chat with no obligation to proceed further

If you’d like to compare retail mortgage deals or discuss your options with a specialist commercial mortgage advisor, you can get started here.