Commercial mortgages

How do you find a commercial mortgage?

You can use a mortgage broker to get quotes. They can work with you from the start to understand your needs and find you the best deal for your circumstances.

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How to apply for a commercial mortgage

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What are commercial mortgages?

A commercial mortgage is another name for a business mortgage. They’re for companies that want to buy property or land for commercial use. You might get a commercial mortgage if you wanted to buy an office, shop floor or property to rent out as an investment. 

Buy-to-let mortgages are a special kind of commercial mortgage for people who want to rent out a residential property.

How do they work?

Commercial mortgages work like normal residential mortgages for the most part: you borrow money from a bank, building society or another lender to finance property or land. The loan is then repaid in monthly instalments with interest added on top. 

However, unlike a residential mortgage, commercial mortgages let you buy one or more properties to:

  • Use for your business

  • Rent out as an investment

Another difference is that you don’t often get fixed-rate business mortgages. Instead, you’ll usually be offered a variable-rate one, for instance, one pegged to the Bank of England base rate, meaning it goes up or down in line with movements in the base rate. However, there are a few lenders, such as NatWest, that offer fixed-rate mortgages for commercial customers.

Depending on your business, lenders could offer you a interest only or repayment mortgage. Some lenders offer interest roll-up mortgages, where you don’t make any payments on the sum borrowed or the interest until the end of the term.

With commercial mortgages, the loan is secured against the property, and you can usually get a loan-to-value rate of up to 75%. This means you need a deposit or equity of at least 25%. Some providers let you use the equity in another property you own instead of a deposit.

Commercial mortgages usually offer terms of between a month and 30 years. The amount you can borrow will vary, but it could be between £50,000 and £40 million. If you need to borrow less, check out our business loans comparison instead.

Commercial mortgage eligibility and criteria

When you apply for a residential mortgage, the provider will decide whether to lend you the money based on strict eligibility criteria. Commercial mortgages are no different, although the factors that the provider considers are not quite the same.

Each lender decides if they can accept your mortgage application based on:

  • your company's income, assets and credit record

  • projected income and cash flow

  • any debts the business owes

  • your personal finances

  • your ability to pay the deposit

  • whether your profits are enough to meet monthly payments

If you plan to rent out the property, rental income will be taken into account and lenders may also look at the finances of your tenants.

Types of commercial mortgages

Owner-occupier mortgages

This is when you get a commercial mortgage to buy property for your business’s use. For instance, a place of work, regional office or trading premises.

Commercial investment mortgages

This kind of mortgage is for investors who want to rent out commercial property. For instance, a shop or office that is rented to other businesses.

Buy-to-let mortgages

These mortgages are used if you want to buy a home that is then rented out as a permanent residence or holiday let.

Property development mortgages

These are designed for property developers. This includes building new homes or converting buildings from residential to commercial (or vice versa).

What fees are involved in commercial mortgages?

Arrangement fees

These are the fees you pay to lenders for arranging the mortgage. They are often between 0-3% with the rate depending on the size of the loan and the lender you use. Sometimes they are charged after completion, but some providers charge a non-refundable fee in advance, so they get paid even if you change your mind.

Valuation fees

The mortgage provider sends someone to assess the property and write a report about its value. These fees vary from lender to lender, so make sure you check to see what they charge. They may be as little as £500 but can be more in complex cases.

Your mortgage lender presents legal fees, and you also need to pay your own mortgage lawyer. Paying both sets of fees can be costly, but having a good lawyer is critical to making sure your purchase goes smoothly.

Broker fees

While you don’t have to use a broker, they can help you understand all the options available to you. They find the best deal and do all the admin and paperwork on your behalf. A typical rate might be 1% of the total value of the loan.

What types of companies can get a commercial mortgage?

You can get a commercial mortgage in your own name, or if you have a:

  • Limited company

  • Limited Liability Partnership (LLP)

  • SPV (Special Purpose Vehicle)

  • SIPP/SSAS

  • Trust

  • Offshore company

What properties could you buy with a commercial mortgage?

You could get a commercial mortgage for:

  • Commercial or residential buy to let investment properties

  • Warehouses and factories

  • Shops and retail premises

  • Office buildings

  • Pubs and hotels

  • Farms and land

  • Professional practices (e.g. solicitors' offices)

Explore mortgage guides

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