UK Commercial Mortgage Guide – A commercial mortgage is a loan secured against a property used for business or investment purposes. It can help a business buy its own premises, refinance an existing commercial property, purchase a commercial investment property, or release capital from a business asset.
Commercial mortgages are different from standard residential mortgages. Lenders usually assess the property, the borrower, the business income, trading history, deposit, credit profile, lease terms and the intended use of the building before deciding whether to lend.
This UK Commercial Mortgage Guide explains how commercial mortgages work, who they are for, what lenders typically consider, which documents may be required, and how to prepare before speaking with an adviser.
If you are ready to explore your options, you can find a commercial mortgage adviser through Connect Experts.
Important: Commercial mortgage advice is regulated where applicable. Some forms of commercial finance and business borrowing may not be regulated by the Financial Conduct Authority.
Key points about commercial mortgages
A commercial mortgage may be suitable if you want to:
- Buy a property for your business to trade from
- Refinance an existing commercial mortgage
- Buy a shop, office, warehouse, industrial unit or mixed-use building
- Purchase a property that will be let to commercial tenants
- Raise funds from a commercial property you already own
- Move from renting business premises to owning them
- Support expansion, relocation or commercial property investment plans
Commercial mortgages are usually more complex than residential mortgages because each property, business and borrower profile is different. The right route depends on your business structure, income, deposit, property type and long-term plans.
If you need specialist support, Connect Experts can help you compare commercial mortgage brokers who understand business property finance.
What is a commercial mortgage?
A commercial mortgage is a loan secured against a property used mainly for business purposes. The property acts as security for the lender. If repayments are not maintained, the lender may be able to take possession of the property.
Commercial mortgages are commonly used for:
- Offices
- Shops and retail units
- Warehouses
- Industrial premises
- Restaurants and hospitality premises
- Care homes
- Nurseries
- Clinics
- Mixed-use or semi-commercial properties
- Commercial investment properties
- Business premises owned by trading companies
A commercial mortgage may be arranged for an owner-occupied property or for a commercial investment property.
An owner-occupied commercial mortgage is usually used when the business will trade from the premises. A commercial investment mortgage is usually used when the borrower intends to let the property to a tenant.
If the building has both commercial and residential use, such as a shop with a flat above, you may need to read our semi-commercial mortgage guide instead.
How does a commercial mortgage work?
A commercial mortgage works by allowing a business, investor or property company to borrow money against a commercial property. The loan is usually repaid over an agreed term through monthly repayments.
The lender will normally consider:
- The property value
- The property type and condition
- The deposit available
- The business income or rental income
- The borrower’s credit profile
- The trading history of the business
- The proposed loan amount
- The repayment method
- The lease terms, if the property is tenanted
- The borrower’s experience
- The exit route, if short-term finance is involved
Because commercial mortgage lending is more bespoke than residential lending, rates, fees, terms and criteria can vary widely between lenders.
For this reason, many applicants choose to find a mortgage adviser who can help match the case to lenders that may be more suitable.
Commercial Mortgage Types
Owner-Occupied Commercial Mortgage
An owner-occupied commercial mortgage is used when a business buys or refinances premises it uses for its own operations.
This may suit:
- A company buying its first office
- A retailer purchasing a shop
- A manufacturer buying an industrial unit
- A professional firm moving from rented premises
- A business refinancing its existing trading premises
Lenders will usually review business accounts, income, affordability, property suitability and the strength of the business.
Commercial Investment Mortgage
A commercial investment mortgage is used when a borrower buys or refinances a commercial property that will be let to tenants.
This may apply to:
- Shops let to commercial tenants
- Offices leased to businesses
- Warehouses let under commercial leases
- Mixed-use investment buildings
- Multi-unit commercial property
Lenders usually focus on rental income, lease length, tenant quality, property location, valuation and the borrower’s experience.
Semi-Commercial Mortgage
A semi-commercial mortgage may be needed when a property has both commercial and residential elements. A common example is a shop with a flat above.
These cases can be more specialist because the lender must assess both the business use and the residential element. If this applies to your property, visit the semi-commercial mortgage guide for more specific guidance.
Limited Company Commercial Mortgage
A limited company may apply for a commercial mortgage when buying or refinancing property through a company structure. This can apply to trading businesses and some property investment companies.
Lenders may review the company’s accounts, directors, shareholders, business purpose, property type, and any required personal guarantees.
If the property will be owned through a company, our limited company mortgage guide may help explain the wider lending considerations.
Bridging Finance for Commercial Property
Bridging finance is short-term funding. It may be used when speed is important or when the property is not ready for a long-term mortgage.
This may apply when:
- Buying at auction
- Refurbishing a commercial property
- Resolving a time-sensitive purchase
- Buying before refinancing
- Purchasing a property that needs work
- Waiting for planning, sale proceeds or longer-term finance
If you need short-term funding before a commercial mortgage, read our bridging loan guide.
Development Finance
Development finance may be suitable for ground-up construction, major refurbishment or property conversion projects. It is usually assessed differently from a standard commercial mortgage because the lender considers development costs, gross development value, experience and exit strategy.
If your project involves construction, conversion or major works, read the development finance guide.
Who Can Apply for a Commercial Mortgage?
Commercial mortgages may be available to different borrower types, including:
- Limited companies
- Sole traders
- Partnerships
- Property investors
- Landlords
- Special-purpose vehicles
- Experienced developers
- Professional firms
- Trading businesses
- Some start-ups, depending on lender criteria
Every lender has its own criteria. Some lenders prefer established businesses with several years of accounts. Others may consider newer businesses if the application is supported by a strong business plan, a suitable deposit, and evidence of security and repayment.
What can a commercial mortgage be used for?
A commercial mortgage can be used for several purposes.
Buying business premises
A business may use a commercial mortgage to purchase premises rather than rent. This can support long-term stability and may allow the business to build equity in the property.
Refinancing an existing commercial mortgage
A borrower may refinance to review the rate, change lender, raise capital, restructure borrowing or move from short-term finance to a longer-term solution.
Buying commercial property to let
Investors may use commercial mortgages to buy properties that are let to business tenants. The lender will usually assess the rent, lease terms and property suitability.
If you are comparing commercial investment property with residential rental property, our buy-to-let guide may also be useful.
Releasing equity
A commercial property owner may release equity from a property for business purposes, subject to affordability and lender criteria.
Expanding a property portfolio
Commercial mortgages can support portfolio growth for investors buying offices, shops, warehouses or mixed-use buildings.
Landlords considering different routes may also want to compare options with buy-to-let mortgage brokers.
Commercial mortgage deposits
Commercial mortgage deposits are usually higher than residential mortgage deposits. The amount required depends on the lender, property type, borrower profile and risk.
As a general guide, many commercial mortgage lenders may expect a borrower to contribute a deposit from around 25% to 40% of the purchase price. Some cases may require more. Stronger applications may have access to more competitive terms, but this depends on the lender’s assessment.
Deposit requirements can be affected by:
- Property type
- Loan size
- Business trading history
- Profitability
- Credit profile
- Sector risk
- Property condition
- Tenant strength
- Lease length
- Borrower experience
- Whether the property is owner-occupied or investment-led
A commercial mortgage adviser can help explain what level of deposit may be realistic before you apply. You can search by location using “Find a mortgage adviser near you.
How lenders assess a commercial mortgage
Commercial mortgage lenders usually assess the borrower, the business and the property together.
Business performance
For trading businesses, lenders often review business accounts, turnover, profits, cash flow and bank statements. They want to see whether the business can afford repayments alongside its other commitments.
Rental income
For commercial investment mortgages, lenders usually assess the rent being paid or expected. They may also consider the lease length, tenant strength and whether the rent is sustainable.
Property type
Some property types are easier to finance than others. Standard offices, shops and industrial units may be more straightforward than highly specialist premises. Properties with unusual use, short leases, poor condition or location concerns may require specialist lenders.
Credit profile
Lenders may review the credit history of the business, directors, shareholders or individual applicants. A weaker credit profile does not always mean an application is impossible, but it can affect lender choice, deposit requirements and pricing.
Experience
Experience can matter, especially for commercial investment, portfolio lending and development finance. Lenders may prefer borrowers who can show relevant sector knowledge or a realistic plan.
Exit route
For short-term lending, bridging finance or development finance, the lender will usually want a clear exit route. This might be sale, refinance or another repayment plan.
For short-term property finance, our bridging loan guide explains how lenders may view repayment plans and exit routes.
Documents Usually Needed for a Commercial Mortgage
Document requirements vary by lender and case type, but you may be asked for:
- Proof of identity and address
- Business bank statements
- Personal bank statements
- Last two or three years’ business accounts
- Management accounts, where available
- Tax calculations or SA302s, where relevant
- Business plan or forecast
- Details of the property
- Purchase contract or sales memorandum
- Tenancy agreements, if the property is let
- Lease details
- Evidence of deposit
- Asset and liability statement
- Details of existing borrowing
- Company structure information
- Director or shareholder information
Preparing documents early can reduce delays and help your adviser approach suitable lenders more efficiently.
If you need help finding an adviser with commercial property experience, you can find a commercial mortgage adviser through Connect Experts.
Commercial Mortgage Readiness Checklist
Before speaking with an adviser, prepare:
- Your latest business accounts
- Recent business bank statements
- Property details
- Deposit evidence
- Lease or tenancy details, if applicable
- A clear explanation of the borrowing purpose
- Details of existing debts
- Your preferred repayment term
- Any planned refurbishment or development details
- Your exit strategy, if short-term finance is involved
This checklist can help you organise the information a lender may request and reduce avoidable delays.
For more information on mortgages and property finance, visit the mortgage guides section.
Commercial Mortgage Costs and Fees
Commercial mortgage costs can vary depending on the lender, property and borrower profile. Typical costs may include:
- Valuation fee
- Legal fees
- Lender arrangement fee
- Broker or adviser fee
- Survey costs
- Insurance costs
- Stamp Duty Land Tax, where applicable
- Early repayment charges, where applicable
- Exit fees, where applicable
You should ask for a full cost breakdown before proceeding. This helps you compare the total cost of borrowing, not just the interest rate.
Commercial Mortgage Rates
Commercial mortgage rates vary because lenders price cases according to risk. The rate available may depend on:
- Loan-to-value
- Property type
- Loan size
- Business performance
- Sector
- Credit history
- Repayment structure
- Fixed or variable rate choice
- Lease strength
- Borrower experience
- Lender appetite at the time of application
A lower rate is not always the best option if the overall structure, fees, flexibility or lender criteria do not suit your circumstances.
A specialist adviser can help you compare available routes.
Commercial Mortgage Term Lengths
Commercial mortgage terms can vary. Some facilities may be arranged over shorter periods, while others may run over many years.
The right term depends on affordability, business plans, lender criteria and whether the loan is for owner-occupied premises or investment property.
A longer term may reduce monthly repayments but can increase the total amount of interest paid. A shorter term may reduce total interest but increase monthly payments.
Repayment Options
Commercial mortgages may be arranged on different repayment structures.
Capital repayment
With a capital repayment mortgage, each monthly payment reduces the loan balance and pays interest. At the end of the term, the mortgage should be repaid if all payments have been made.
Interest-only
With interest-only borrowing, monthly payments cover interest, but the capital balance remains outstanding. The borrower will need a credible repayment strategy.
Part and part
Some lenders may allow a combination of capital repayment and interest-only borrowing, depending on the case.
The right structure depends on cash flow, tax position, repayment plans and lender appetite. You should take professional advice before choosing a repayment method.
Commercial Mortgage Example
A small business currently rents an office and wants to buy its own premises.
The property purchase price is £500,000. The business has a £150,000 deposit and wants to borrow £350,000 through a commercial mortgage.
The lender reviews the company accounts, bank statements, business performance, credit profile and valuation. If the lender is satisfied that the business can afford the repayments and the property is suitable security, it may issue a mortgage offer.
This is only an illustrative example. Actual lending decisions depend on the lender’s criteria and the applicant’s full circumstances.
Commercial Mortgage versus Buy-to-Let Mortgage
A commercial mortgage is usually used for properties used for business, such as offices, shops, warehouses, or mixed-use properties. A buy-to-let mortgage is usually used for residential property let to tenants.
The lender assessment can be different. Commercial mortgage lenders may focus on business income, lease quality, trading performance and property use. Buy-to-let lenders usually focus on rental income, landlord profile, property type and personal or company structure.
If you are comparing both options, read the buy-to-let guide or search for buy-to-let mortgage brokers.
Commercial mortgage versus semi-commercial mortgage
A commercial mortgage may be used for a property used fully for business purposes. A semi-commercial mortgage may be used where the property includes both commercial and residential elements.
Examples of semi-commercial property include:
- Shop with a flat above
- Office with residential accommodation
- Restaurant with a living space
- Mixed-use building with commercial and residential units
If your property has both uses, it is important to speak with an adviser who understands mixed-use lending. You can also read our semi-commercial mortgage guide for more details.
When Should You Speak with a Commercial Mortgage Adviser?
You may want to speak with an adviser if:
- You are buying business premises
- You want to refinance a commercial property
- You are buying a commercial investment property
- You need finance for a shop, office, warehouse or industrial unit
- Your property is mixed-use
- You are buying through a limited company
- You have complex income
- You have limited trading history
- You need bridging finance before a long-term mortgage
- You are unsure which lender may consider your case
A commercial mortgage adviser can help you understand the most suitable route before you apply. You can compare commercial mortgage brokers or use Connect Experts to find a commercial mortgage adviser.
How Connect Experts Can Help
Connect Experts helps users find mortgage advisers across the UK. You can search by location, language, gender and expertise to find an adviser who suits your needs.
For commercial mortgages, this can be useful because specialist knowledge matters. The right adviser can help you understand lender criteria, prepare documents, compare options and structure the application.
Connect Experts does not provide mortgage advice directly. Advice is provided by the adviser or firm you choose.
Start your search by finding mortgage advisers, or go straight to finding a commercial mortgage adviser.
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FAQ: Commercial Mortgage Guide
| Question | Answer |
|---|---|
| What is a commercial mortgage? | A commercial mortgage is a loan secured against a property used for business or investment purposes. It can be used to buy or refinance offices, shops, warehouses, industrial units, mixed-use buildings and other commercial property. |
| Who can apply for a commercial mortgage? | Limited companies, sole traders, partnerships, property investors, landlords and some start-ups may be able to apply. Eligibility depends on lender criteria, affordability, deposit, business income, property type and credit profile. |
| How much deposit do I need for a commercial mortgage? | Many commercial mortgage lenders may expect a deposit from around 25% to 40%, but this varies by case. Some property types, sectors or borrower profiles may require a higher deposit. |
| Can I get a commercial mortgage with limited trading history? | Some lenders may consider newer businesses if the application is supported by a clear business plan, suitable deposit, strong projected income and credible repayment evidence. Options may be more limited than for established businesses. |
| Are commercial mortgages regulated by the FCA? | Some commercial mortgage advice may be regulated, but some forms of commercial finance and business borrowing may not be regulated by the Financial Conduct Authority. Your adviser should explain what applies to your case. |
| How long does a commercial mortgage take? | Timescales vary depending on the lender, valuation, legal work, property type and document preparation. More complex cases can take longer, especially where leases, company structures or property issues need further review. |
| Can I use a commercial mortgage to buy a shop with a flat above? | A shop with a flat above may require a semi-commercial mortgage because the property includes both commercial and residential elements. Read our semi-commercial mortgage guide if your property has mixed use. |
| Can a limited company get a commercial mortgage? | Yes, some lenders consider limited company applications. They may assess the company accounts, directors, shareholders, business activity, property type and repayment ability. |
| Can I refinance a commercial property? | Yes, refinancing may be possible if the property, borrower and affordability meet lender criteria. Borrowers may refinance to review terms, release equity, repay short-term finance or restructure borrowing. |
| What documents are needed for a commercial mortgage? | Lenders may ask for accounts, bank statements, proof of identity, proof of address, property details, lease agreements, business plans, forecasts, deposit evidence and details of existing borrowing. |
| Are commercial mortgage rates higher than residential mortgage rates? | Commercial mortgage rates can be higher than residential mortgage rates because the risk assessment is different. Rates depend on the lender, deposit, property type, borrower strength, business performance and overall case profile. |
| Do I need a commercial mortgage broker? | You are not required to use a broker, but commercial mortgage criteria can vary widely. A specialist adviser can help identify suitable lenders, explain requirements and prepare the application. You can find a commercial mortgage adviser through Connect Experts. |
Important Information
Connect Experts is a mortgage adviser directory and matching platform. We do not provide mortgage advice directly. Advice is provided by the adviser or company you choose.
We are an FCA-approved broker network and not a lender. Advisers may have access to a range of lenders. If a lender is introduced, commission may be received after completion. The commission amount may vary by lender and product, but it should not affect the amount you pay under your credit agreement.
A fee may be payable for arranging your mortgage. Your adviser will confirm the amount before you choose to proceed.
Your home or property may be repossessed if you do not keep up repayments on your mortgage or loans secured on it.