Pillar Guide · Updated July 2026
Commercial Mortgages: A Complete UK Guide for 2026/27
Buying business premises or a commercial investment property usually means a commercial mortgage rather than a residential one, with higher deposits, different affordability tests, and shorter terms. This guide explains owner-occupier vs investment commercial mortgages, how lenders assess affordability, typical costs, and the application process.
What a Commercial Mortgage Is
A commercial mortgage is a loan secured against non-residential property — offices, retail units, warehouses, industrial premises, or mixed-use buildings — used either to house your own trading business or as a rental investment. Because commercial property is more varied and can be harder to resell than a standard house, lenders apply more bespoke underwriting than for residential mortgages.
Owner-Occupier vs Investment Mortgages
An owner-occupier commercial mortgage funds premises that your own business will trade from, and lenders assess it primarily against that business's accounts, profitability and cash flow. An investment (sometimes called "commercial buy-to-let") mortgage funds a property let to a third-party tenant, and lenders instead focus mainly on the rental income the property produces and how comfortably it covers the mortgage payments.
Deposit Requirements
Commercial mortgage deposits are typically higher than residential mortgages, commonly ranging from 25% to 40% of the property's value depending on the property type, tenant quality (for investment property), and the lender's appetite for that sector. Specialist or higher-risk property types, such as leisure or hospitality premises, can require an even larger deposit.
How Lenders Assess Affordability
For owner-occupier applications, lenders scrutinise trading accounts, profitability trends, and cash flow forecasts to satisfy themselves the business can service the debt through normal trading conditions. For investment property, lenders typically apply an interest coverage ratio test, checking that rental income exceeds mortgage interest payments by a set margin even under a stressed, higher interest rate scenario, to protect against void periods or rate rises.
Rates and Terms
Commercial mortgage interest rates are generally higher than equivalent residential mortgage rates, reflecting the more varied and less liquid nature of commercial property, and many are offered on variable or tracker rates rather than long fixed terms. Loan terms commonly range from 3 to 25 years, often shorter than typical residential mortgage terms, and some lenders specialise in particular property sectors such as retail, industrial, or healthcare premises.
Fees and Costs
Beyond interest, expect an arrangement fee (often 1%-2% of the loan amount), a formal property valuation fee, legal fees for both your own and the lender's solicitors, and in some cases an early repayment or exit fee. These costs should be added to the interest rate when comparing lenders, since a lower headline rate can be outweighed by higher upfront fees.
The Application Process
A typical application involves submitting business accounts or a business plan, personal identification and financial information for directors or partners (who will usually need to give personal guarantees for a company loan), and a formal valuation of the specific property. Approval and completion timelines vary widely by lender and property complexity, and specialist commercial finance brokers are often used to match a borrower with a lender suited to their sector and circumstances.