Commercial Mortgage Guide – Expert Insight on Commercial Mortgages. Are you considering a commercial mortgage to buy, refinance, or expand a business or property investment portfolio?
A commercial mortgage can be used to purchase or refinance offices, retail units, industrial buildings, or mixed-use properties. These loans are designed for business purposes and require careful financial planning from the outset.
Unlike residential mortgages, commercial mortgages are assessed based on business performance, projected income, and property viability. Lenders often require higher deposits and detailed financial documentation. Loan terms are influenced by property type, trading history, and the strength of the business plan.
This guide provides clear and practical insight into the UK commercial mortgage process. It explains what lenders look for, how affordability is assessed, and how to prepare a strong application. The aim is to help you reduce delays, improve approval prospects, and make informed decisions.
If you are unsure where to start, speaking with an experienced adviser can help. A qualified specialist can guide you through lender criteria, documentation requirements, and repayment structures. You can use our Find a Mortgage Adviser service to connect with professionals who specialise in commercial lending.
Commercial mortgage advice is regulated where applicable. Your property may be repossessed if you do not keep up with repayments on a mortgage.
What Is a Commercial Mortgage?
A commercial mortgage is a loan secured against commercial property (i.e., not your home). It allows businesses to buy, refinance, or develop property for business use.
Examples of eligible properties include:
- Offices
- Warehouses
- Retail units
- Industrial premises
- Care homes
- Buy-to-let portfolios (under commercial terms)
Why Consider a Commercial Mortgage?
| Benefits | Why It Matters |
|---|---|
| Long-Term Stability | Fixed or variable rates over longer periods offer financial predictability |
| Equity Growth | Property ownership can increase your business’s net worth |
| Rental Income | Own and let out part or all of the property |
| Refinancing Options | Improve cash flow, consolidate debts or release equity |
| Tailored Terms | Commercial mortgages can be structured to suit your business cash flow |
Who Are Commercial Mortgages For?
Commercial mortgages are designed for a range of business and property-related needs.
They suit borrowers who want to purchase, refinance, or develop commercial property.
Typical borrower types include:
- Trading businesses: Companies purchasing or refinancing premises for their own business use.
- Property investors: Landlords acquiring or refinancing commercial or mixed-use investment properties.
- Property developers: Borrowers funding new builds, conversions, or major refurbishments.
- SMEs and startups: Businesses securing their first premises, subject to lender criteria and affordability.
Types of Commercial Mortgages
There are several commercial mortgage types, each designed for different property uses and borrower needs.
- Owner-occupied commercial mortgages: The business operates from the property.
Commonly used by trading companies. - Commercial investment mortgages: The property is rented to tenants and generates income.
Often used by landlords and portfolio investors. - Semi-commercial mortgages: The property has both residential and commercial elements, such as a shop with a flat above.
Suitable for landlords with mixed-use assets. - Bridging finance: Short-term funding used to complete purchases quickly or refinance before a long-term solution.
Often used by developers and auction buyers. - Development finance: Funding for ground-up construction or heavy refurbishment projects.
Designed for experienced property developers.
If you are unsure which route applies to you, a commercial mortgage adviser can assess your situation and explain the options available.
What Documents Will You Need?
To prepare for an application, ensure you have:
- Last 2-3 years’ accounts (or forecasts if new business)
- Bank statements (business & personal, usually 3-6 months)
- Business plan (especially for startups)
- Details of the property
- Tenancy agreements (for investment properties)
- Proof of identity & address
Real-Life Example: Growth Through Ownership
Company: Small marketing agency in Manchester
Goal: Buy their own office instead of renting
Solution: £300,000 commercial mortgage at 70% LTV
Result: Saved £1,200/month compared to rent, gained asset ownership, and unlocked future equity
“Buying our office wasn’t just a property decision — it was a growth strategy.”
– Managing Director, Local Marketing Co.
Common Myths About Commercial Mortgages
You need perfect credit
This is not always true.
Some lenders consider minor credit issues with supporting explanations.
Commercial mortgages are only for large businesses
Many SMEs and smaller companies successfully secure funding.
Rates are always high
Rates vary widely.
Strong applications can achieve competitive terms.
Renting is always faster or cheaper
Ownership can provide long-term stability and asset growth.
All commercial mortgages are the same
Products differ significantly based on property type, risk, and borrower profile.
For tailored guidance, speak with a UK mortgage broker to clarify what is realistic for your situation.
Important notice:
Your property may be repossessed if you do not keep up repayments on your mortgage.
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FAQ: Commercial Mortgage Guide
| Question | Answer |
|---|---|
| 1. What is a commercial mortgage? | A commercial mortgage is a loan secured on a property used for business purposes. It allows companies or investors to buy offices, retail units, warehouses, or mixed-use buildings. |
| 2. Who can apply for a commercial mortgage? | Commercial mortgages are available to limited companies, partnerships, sole traders, and investors purchasing or refinancing business premises. |
| 3. How much deposit do I need? | Most lenders require a deposit of 25% to 40% depending on the property type, business performance, and credit profile. |
| 4. What types of commercial mortgages are available? | There are two main types: Owner-Occupied (for businesses buying their own premises) and Commercial Investment (for investors buying property to let to tenants). |
| 5. How is a commercial mortgage different from a buy-to-let mortgage? | A commercial mortgage is secured against business premises and assessed on trading performance, while a buy-to-let mortgage is for residential properties rented to individuals. |
| 6. What interest rates apply to commercial mortgages? | Rates vary depending on the lender, loan size, deposit, and risk profile. Typically, commercial rates are higher than residential mortgages due to increased risk. |
| 7. Can I get a commercial mortgage through a limited company? | Yes. Many investors use a limited company structure to buy commercial or semi-commercial properties for tax efficiency and portfolio management. |
| 8. What documents are required for an application? | Lenders usually request business accounts for two to three years, bank statements, proof of ID, property details, and a business plan or forecast. |
| 9. How long does the process take? | The average commercial mortgage application takes between six and twelve weeks, depending on the complexity of the deal and how quickly documents are provided. |
| 10. Can I get 100% financing? | It’s rare, but possible if additional security such as another property or director guarantees are provided. Most lenders require a minimum deposit. |
| 11. Are there arrangement fees? | Yes. Expect lender arrangement fees of around 1% to 2% of the loan amount plus valuation and legal fees. Your adviser will provide a breakdown before the application. |
| 12. What if my business has limited trading history? | Some specialist lenders offer commercial mortgages to new businesses or start-ups if there is a strong business plan and additional security. |
| 13. Can foreign investors apply for a UK commercial mortgage? | Some lenders will consider non-UK residents or overseas companies, but lending criteria are stricter and may require a higher deposit. |
| 14. What happens at the end of the term? | You can refinance, switch lenders, or repay the remaining balance. Many borrowers review their deal every few years to ensure they remain on competitive terms. |
| 15. Why use a mortgage adviser for commercial property? | A specialist commercial mortgage adviser can access lenders and deals not available directly to the public, helping you secure better terms and structure your finance efficiently. |
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