What is a commercial mortgage?
A commercial mortgage is a loan secured against a property that is not solely used as someone's home — offices, shops, warehouses, industrial units, land, farms, and mixed-use buildings all fall into this category. The loan can be used to buy the property outright, to refinance an existing commercial property, or to release capital tied up in one.
Unlike a standard residential mortgage, there is no single set of published criteria. Each lender decides its own maximum loan size, deposit requirement and acceptable property types, and assessments are usually done case by case rather than through automated scoring alone.
Who uses commercial mortgages
- Businesses buying the premises they trade from, instead of renting
- Property investors buying commercial or mixed-use buildings to let to tenants
- Buyers acquiring a trading business along with its premises
- Farmers and rural businesses buying or refinancing land and buildings
- Owners of mixed-use property, such as a shop with a flat above
- Existing commercial property owners looking to remortgage or release equity
Types of commercial finance
Owner-occupied premises
Where a business buys the building it trades from, lenders typically look at the strength of the business and its ability to service the debt from trading income.
Investment property
Where the property is bought to let to a third-party tenant, lenders generally focus on the rental income and the strength of the tenant's lease — see our dedicated page on commercial buy-to-let.
Semi-commercial
Mixed-use buildings combine a commercial and a residential element, such as a shop with a flat above. These are assessed differently from either a pure commercial or pure residential loan — see our semi-commercial page.
Commercial buy-to-let
A specific form of investment lending covering offices, retail, industrial and other units let to businesses.
Buying business premises
Finance to buy the property a business will occupy, sometimes alongside funding for fit-out or equipment.
Buying a trading business
Acquiring a business and its premises together involves more than a property loan — see our buy-a-business page for how goodwill, stock and working capital fit in.
Farms and agricultural land
Farm finance has its own considerations, including seasonal income, tenancies and diversified income streams — covered on our farm and agriculture page.
Remortgaging and raising capital
Existing commercial property owners may be able to remortgage to a new lender or raise additional capital against the property, subject to a fresh valuation and affordability assessment.
Interest-only options
Some commercial lenders offer interest-only or part-and-part terms, which reduce monthly payments but leave capital outstanding — see our interest-only page for the risks involved.
When bridging or development finance fits better
A standard commercial mortgage suits a property that is already usable and income-generating, or a straightforward purchase of trading premises. Where a property needs significant works before it can be let or mortgaged conventionally, where a purchase needs to complete quickly, or where the plan involves changing a property's use, short-term bridging finance or a development facility may be more appropriate.
Bridging and development finance are separate facilities, and a bridge or development loan may later be refinanced onto a standard commercial mortgage. See our bridging finance hub for more on short-term options.
How lenders assess affordability
Business cash flow and serviceability
For owner-occupied lending, lenders typically review business accounts, cash flow and trading history to judge whether the business can comfortably service the debt.
Rental income, ICR and DSCR
For investment lending, rental income is usually measured against the loan using an interest cover ratio (ICR) or debt service coverage ratio (DSCR) — a comparison of rental income to the cost of servicing the loan. Lenders set their own thresholds, and there is no single universal figure used across the market.
Deposit and LTV
Lenders set their own maximum loan-to-value (LTV), which varies by property type, tenant strength, sector and the borrower's circumstances. A larger deposit generally gives access to a wider range of lenders.
What lenders usually ask for
- Business accounts or trading history, where relevant
- Details of the property, including its current and intended use
- Lease details and tenant information for investment property
- A deposit or equity contribution
- Evidence of your experience with similar property or businesses
- A business plan, for acquisitions or significant changes of use
Regulated and unregulated lending
The regulatory position depends on the borrower, the property, how the security is used and any applicable exclusions. Mixed-use property requires an assessment of the proposed loan as a whole. The adviser handling the case will confirm the position before recommending finance.
Costs and fees
Commercial mortgage pricing depends on factors such as the property type, loan-to-value, tenant or business strength, and the lender's own funding costs. Beyond the interest rate, borrowers typically also face arrangement fees, valuation fees and legal costs. See our rates and costs page for a full breakdown of how pricing is set and what else to budget for.
How the process works
- Tell us about the property, the purpose and your business or investment background
- For a commercial mortgage, we tell you which third-party specialist we propose to refer you to and what information will be shared, before passing on your details
- The specialist advises you, explains its own fees and works with the lender on the application
- A formal valuation and underwriting assessment takes place
- Legal work proceeds alongside any conditions the lender sets
- The loan completes and funds are released
Who provides the advice and how it is paid for
Commercial Services are referred to a third party. Neither The Mortgage Genie nor PRIMIS are responsible for the service received.
The Mortgage Genie does not provide commercial mortgage advice. Our team will discuss your requirements and, where appropriate, identify a suitable partner adviser. We will explain who they are and obtain your permission before sharing your details.
We do not charge for commercial mortgage advice, because we do not provide it. The specialist will disclose its own fees and how it is paid before you decide whether to go ahead.