Mortgages for
Commercial Property

A commercial mortgage is a loan granted to an individual, Limited Company or Trading Limited Company to purchase or remortgage a commercial property or a business. 

Commercial property typically refers to any property which contains a trading business but can also include large residential rental properties like blocks of flats, and land that generates an income. With such a broad spectrum of property possibilities, commercial mortgage lenders have varying approaches and appetites for different properties and business types. At MFB, our specialist commercial team have dealt with almost every commercial property and business type. However, here are some of the sectors we deal with most often:

• Retail (e.g., shops and high street services)
• Large residential (e.g., MUFBs)
• Hotels
• Hospitality (e.g., Pubs and Restaurants)
• Childcare businesses
• Care-homes

Mortgages for commercial property typically range between £50,000 and £25 million; however, how much you can borrow on a commercial mortgage depends on many factors, including loan to value (LTV), property type, trading business type, credit score and more. These factors will be unique to your circumstances. The best way to determine how much you could borrow is to speak to one of our expert commercial mortgage brokers about your plans.

The main difference between a mortgage for commercial property and a homebuyer mortgage is that a commercial mortgage can only be secured on property you cannot live in, or that is run as a business where the percentage of living space is less than 40% (like a guesthouse or hotel). However, there are some further differences to be aware of:

• The maximum loan to value (LTV) may be lower than a homebuyer mortgage
• Variable mortgage rates are more commonly used for commercial mortgages. However, fixed-rate mortgages are available from most commercial lenders.
• Commercial mortgage interest rates tend to be higher than the rates you’d secure on your home. However, unlike homebuyer mortgages, some commercial mortgage rates can be negotiated on a case-by-case basis. An MFB commercial mortgage broker may be able to secure you better terms with a lender. 

Typically, commercial mortgage interest rates are higher than residential or homebuyer mortgages. This is due to the lender’s perceived risk of the loan not being repaid and the resaleability of the property.

The quickest way to determine if you can get a commercial mortgage is to speak to one of our expert commercial mortgage brokers. However, this summary will help you decide whether you’re eligible.

Commercial mortgage eligibility is based on your background experience and by assessing your ability to meet the monthly loan repayments. As with any mortgage, commercial mortgage lenders want to see financial evidence that you can repay the lending.

For commercial investment mortgages, for properties you let out to other businesses, lenders will conduct background checks to satisfy the risk, including: 

• Assessing your net worth
• The source of your deposit
• The rental income for the property, either existing or predicted
• The quality of the tenant and lease term remaining
• Checking your personal and/or Limited Company bank statements for proof of good accounting
• FAFT elegibility if an expat or foreign national

For commercial owner-occupier mortgages, where you intend to run your business from the premises, lenders will want to know a lot about you and your business. Therefore, they’ll check:

• Your net worth
• The value of your existing or target business
• The source of your deposit
• Two to three years’ historical financial accounts for either existing or target business purchases
• Business bank statements for proof of good accounting

Generally, commercial mortgage lenders require a minimum 25% deposit for a commercial mortgage. However, this will vary by lender, business sector, and whether it’s an investment or owner-occupier mortgage. As with most mortgages, the larger the deposit you can invest, the better the commercial mortgage interest rates you can access. Speak to our expert mortgage brokers for a definitive answer based on your current circumstances.