Published and reviewed 23 October 2026. General information, not advice. Figures are illustrations, not lender quotes.
The short version
- A commercial buy to let mortgage, often called a commercial investment mortgage, is a loan to buy or refinance a shop, office, industrial unit or similar building that is let to a tenant. The rent, the lease and the tenant matter more to the lender than your own trading profits.
- Most lenders lend up to about 60% to 75% of the value, and the rent must cover the interest by about 125% or more at a stressed rate. On our £600,000 industrial unit let at £45,000 a year, the value test set the loan at £420,000. With a weaker £34,000 rent, the rent test cut it to about £375,000, or about £323,000 on capital repayment.
- In October 2026, commercial investment loans commonly cost about 6.5% to 8.5% a year, around half a point to a point and a half more than owner-occupied loans. Semi-commercial property, such as a shop with flats above, is often cheaper.
- Plan for about 35% to 40% of the price in cash. In our example the deposit, Stamp Duty Land Tax, fees and legal costs came to about £218,800 on a £600,000 purchase. If VAT is charged and the sale is not a transfer of a going concern, the cash needed jumps by £120,000 plus extra stamp duty.
- With borrowing at 7.25% and a 7.5% yield, leverage barely helped: the company’s cash return was lower than buying outright. And a tenant break could cost about £62,000 in lost rent, mortgage payments, empty rates and reletting. Keep a cash reserve and read the lease as closely as the loan.
What a commercial buy to let mortgage is
A commercial buy to let mortgage is a long-term loan secured on commercial property that the borrower owns as an investment and lets to someone else. Lenders, brokers and banks use several names for the same thing: commercial investment mortgage, commercial buy to let, investment property loan or simply an investment loan. The tenant is usually a business, such as a retailer in a shop, a manufacturer in an industrial unit or a professional firm in an office.
The defining feature is where the repayments come from. With an owner-occupied commercial mortgage, the lender looks at your trading profits, because your own business occupies the building and pays for it. With an investment loan, the lender looks first at the rent, the lease that secures it and the tenant who pays it. Your own finances still matter, but as a back-up rather than the main source of repayment.
| Commercial buy to let | Owner-occupied commercial mortgage | Residential buy to let | |
|---|---|---|---|
| Who occupies the building | A third-party tenant, usually a business | Your own trading business | A residential tenant |
| What repays the loan | The rent under the lease | Your trading profits | The rent under a residential tenancy |
| Main affordability test | Rent cover: interest cover ratio or debt service cover | Debt service cover from your adjusted earnings | A standardised rent cover test at a stressed rate |
| Typical maximum loan to value | About 60% to 75% | About 60% to 75% | Usually up to 75%, sometimes 80% |
| Typical terms | Usually 5 to 25 years, sometimes interest only | Usually up to 25 years, mostly capital repayment | Usually up to 25 or 30 years, often interest only |
| How it is priced | Individually, on the lease, tenant and building | Individually, on the business and building | Largely from published product ranges |
| Regulation | Generally unregulated | Generally unregulated | Mostly unregulated, with some exceptions |
This guide covers commercial and semi-commercial investment property. Residential buy to let in a limited company is a different market with standardised products, and is not covered here. A building your own business occupies is covered in our guide on how to get a commercial mortgage.
When your company lets to your own trading company
A common structure is for directors to buy premises in one company, or personally, and let them to their trading company. Most lenders treat this as owner-occupied, not investment, because the rent depends entirely on the trading business. They assess the trading company’s profits, may ask both companies to guarantee the loan, and price it as an owner-occupied loan. Check how a lender will treat a connected lease before you apply, because it changes the tests, the rate and the documents.
What you can buy, and how lenders view each type
Lenders look at a building through one question: if the tenant left and the loan went wrong, how easily could the property be relet or sold? The easier the answer, the higher the loan to value and the lower the rate.
| Property type | Lender appetite | Typical maximum loan to value | What helps |
|---|---|---|---|
| Industrial units and warehouses | Strong. Steady demand and simple buildings. | Often 70% to 75% | Good road access, eaves height, yard space and a modern EPC |
| Offices | Good for modern, well-located space. Weaker for dated or secondary offices. | Often 65% to 75% | A strong tenant, a good EPC and flexible floor plates |
| Shops in strong locations | Good for established high streets and parades. | Often 65% to 70% | A national or long-established tenant and a long lease |
| Secondary retail | Mixed. Vacancy risk worries lenders. | Often 60% to 65% | A low rent compared with the market, and alternative uses |
| Semi-commercial or mixed-use | Strong, especially where the residential part is large. | Often 70% to 75%, sometimes more | Separate access to the flats and a modern residential tenancy |
| Multi-let buildings | Good if the income is spread across several sound tenants. | Often 65% to 70% | No single tenant paying most of the rent, and staggered lease ends |
| Pubs, hotels, leisure, care homes, petrol stations | Specialist. Valued partly on trading performance. | Often 50% to 65% | A tenant with a long record in the sector |
| Vacant buildings and land | Limited for a term loan. | Often bridging finance first | A letting or planning plan, and a route to a term loan |
These are typical ranges drawn from published lender criteria and market practice, not offers. As an example of published criteria, Yorkshire Building Society’s commercial investment mortgage lends from £300,000 up to 75% loan to value on offices, retail, industrial and warehouse property, over 5 to 25 years, and offers a small rate discount for warehouses and industrial units. Check each lender’s current criteria.
A vacant building, or one needing major work before it can be let, rarely qualifies for a term investment loan. Buyers often use a commercial bridging loan to buy and let it, then refinance onto a commercial buy to let mortgage once a tenant has signed.
How much can you borrow? The value test and the rent test
Most lenders apply two tests and lend the lower answer.
- Loan to value. The loan is capped at a percentage of the property’s value, usually 60% to 75%. Lenders value on the lowest of the price, the open market value and, for let property, an investment value based on the rent and lease. Some will also ask what the building is worth empty.
- Rent cover. The rent must cover the loan payments with a margin. The most common measure is the interest cover ratio (ICR): annual rent divided by annual interest, at a stressed rate rather than the actual rate. A typical minimum is 125%, sometimes 130% to 150% for weaker tenants or specialist property. Some lenders use a debt service cover ratio (DSCR) instead, which includes capital repayments, so it bites harder on a repayment loan.
Lenders count the rent they can rely on, usually the lower of the passing rent and the market rent. A tenant paying above market rate today may not do so on renewal. As an example of how detailed the tests can be, Yorkshire Building Society’s published criteria ask for interest cover of at least 125% at the higher of the product stress rate or 6%, using the lower of passing and market rent, and for capital repayment loans also test that the rent covers the full payment at a rate above the pay rate.
Worked example: sizing the loan on a £600,000 industrial unit
A property company plans to buy a light industrial unit for £600,000. It is let to an established engineering firm at £45,000 a year, a 7.5% gross yield, on a 10-year full repairing and insuring lease with seven years left and a tenant break in two years. The valuer puts market rent at £46,000. The lender’s tests are illustrations, in line with published criteria, not any lender’s offer:
- Value test: 70% of £600,000 allows up to £420,000.
- Rent test, interest only: £45,000 rent divided by 125% cover allows £36,000 of interest a year. At a stress rate of 7.25%, the pay rate, that supports up to about £496,600.
- Rent test, capital repayment: the rent must cover the full repayment at 8.65%, the pay rate plus 1.4%. Over 20 years that supports up to about £427,400.
The value test is lowest, so the loan is £420,000 and the deposit is £180,000. At 7.25% over 20 years, the repayment would be about £3,320 a month, or about £39,800 a year, covered 1.13 times by the rent at the actual rate.
Worked example: the same price with a weaker rent
Now the building is a secondary office at the same £600,000 price, let at £34,000 a year with three years left on the lease. The same tests give:
- Value test: still up to £420,000.
- Rent test, interest only: £34,000 divided by 125% allows £27,200 of interest, which at 7.25% supports about £375,200.
- Rent test, capital repayment: about £322,900 over 20 years at the stressed 8.65%.
Here the rent sets the loan. The buyer needs a deposit of about £224,800 on an interest-only basis or about £277,100 on capital repayment, not £180,000. Many lenders would also offer less than 70% on a short lease, and charge more.
Two lessons follow. Work out the rent test before you agree a price, because a building with a modest rent can need far more cash than its price suggests. And the repayment basis matters: interest only, or a part-and-part loan where some of the balance is interest only, can raise the rent-test limit, but leaves a balance to repay at the end. Our guide to how much a business can borrow covers the same tests for other kinds of borrowing.
The lease and the tenant: what lenders read first
For an investment loan, the lease is the income, so the lender’s valuer and solicitor will read it line by line. These are the points that move the loan and the rate most.
| Point | What lenders like | What causes problems |
|---|---|---|
| Unexpired term | Five years or more left, ideally beyond the end of any fixed rate | Under three years left, or a lease already ended with the tenant holding over |
| Break clauses | None, or a tenant break well into the loan with a penalty or notice period | A break in the first year or two, or a mutual rolling break |
| Repairing terms | Full repairing and insuring (FRI), so the tenant pays for repairs and insurance | Internal repairing only, leaving the landlord with roof and structure costs |
| Rent reviews | Upward-only reviews to market, or fixed or index-linked increases | Rent well above market, which may fall at renewal |
| Tenant covenant | An established company with several years of filed accounts and a clean record | A newly formed company, a weak balance sheet or arrears |
| Guarantees and deposits | A parent company guarantee or a rent deposit | No guarantee from a new or thinly capitalised tenant |
| Security of tenure | A lease inside the Landlord and Tenant Act 1954, with the protections understood | Unclear renewal rights or informal arrangements |
| Use and alienation | A use clause that allows reasonable alternatives | A narrow use clause that would make reletting hard |
Security of tenure under the 1954 Act
Most business tenants in England and Wales have the right to a new lease at the end of the term under Part II of the Landlord and Tenant Act 1954, unless the lease was contracted out of those protections before it was signed. For a landlord, this cuts both ways. A protected tenant is more likely to stay, which supports the income. But the landlord can only end the tenancy on the grounds set out in the Act, such as redevelopment or persistent arrears, and may owe the tenant compensation. Ask your solicitor whether each lease is inside or outside the Act.
Judging the tenant
Before you buy, look up the tenant at Companies House: filed accounts, the age of the company, outstanding charges and any late filing. Ask the seller for the rent payment history and any arrears. The lender will do the same, and a tenant that has paid on time for years in the same building is the strongest evidence you can offer. A building let to several tenants spreads the risk, but adds management work and more lease ends to plan for.
Commercial buy to let mortgage rates in October 2026
The Bank of England’s Bank Rate has been 3.75% since December 2025, and was held again on 17 September 2026. Fixed rates are built on swap rates rather than Bank Rate, and five-year swaps were around 4.7% in early October 2026. Our guide to commercial mortgage rates explains how both feed through.
| Loan | Typical rate | Notes |
|---|---|---|
| Five-year fix, commercial investment | About 6.5% to 8.5% | Strong tenant, long lease, mainstream building and lower loan to value at the lower end |
| Five-year fix, semi-commercial investment | About 6% to 7.5% | Often cheaper than pure commercial, because the flats are easy to let and value |
| Tracker or variable | Bank Rate plus about 2.5% to 5% | About 6.25% to 8.75% today, usually with a floor |
| Specialist property, short leases or adverse credit | 8.5% and above | Pubs, leisure, a single weak tenant or past credit problems |
| For comparison: owner-occupied commercial | About 6% to 8% | Usually cheaper, because your own business depends on the building |
These are indicative ranges drawn from published lender rates and market data, not quotes. As one example, Allica Bank’s published five-year fixed rates, checked on 20 October 2026, were 7.90% up to 65% loan to value and 8.10% above it for commercial investment, against 6.30% and 7.15% for semi-commercial investment and 6.50% and 6.85% for owner-occupied commercial. The lender says these include a 0.50% discount for holding the business current account with it.
The same pattern shows up across lenders: investment loans cost more than owner-occupied ones because the lender depends on a third party paying rent. What brings the rate down is what reduces that dependence: a long lease without early breaks, a strong tenant, a modern building with a good EPC, a lower loan to value and your own experience as a landlord.
The cash you need: deposit, stamp duty, VAT and fees
The deposit is the biggest cost but not the only one. These are the main items on a commercial investment purchase in England.
| Item | Illustrative amount | Notes |
|---|---|---|
| Deposit | £180,000 | 30% of £600,000, with a 70% loan of £420,000 |
| Stamp Duty Land Tax | £19,500 | Non-residential rates: 0% to £150,000, 2% to £250,000, 5% above |
| Lender arrangement fee | £6,300 | 1.5% of the loan. Often 1% to 2%, sometimes added to the loan |
| Valuation | £3,000 | Paid upfront, even if the purchase falls through. Larger or specialist buildings cost more |
| Legal fees | £10,000 | Your solicitor and the lender’s solicitor, who will review every lease |
| Total cash before VAT | £218,800 | About 36% of the price |
Stamp duty in England, Scotland and Wales
In England and Northern Ireland, Stamp Duty Land Tax on non-residential and mixed-use property is 0% up to £150,000, 2% from £150,001 to £250,000 and 5% above £250,000. The higher rates for additional homes do not apply to commercial or mixed-use purchases. In Scotland, Land and Buildings Transaction Tax on non-residential property is 0% up to £150,000, 1% to £250,000 and 5% above. In Wales, Land Transaction Tax on non-residential property is 0% up to £225,000, 1% to £250,000, 5% to £1 million and 6% above. On £600,000, that is £19,500 in England, £18,500 in Scotland and £17,750 in Wales.
VAT: the cost most buyers miss
Selling commercial property is normally exempt from VAT, but a seller who has opted to tax the building must charge 20% VAT on the price. On a £600,000 building that is £120,000. Stamp duty is charged on the VAT-inclusive price too, so in England it rises from £19,500 to £25,500. A VAT-registered buyer that has also opted to tax can usually reclaim the VAT, but it has to fund it first, often for one to three months, and lenders will not lend against it.
For a let building, the sale can often be treated as a transfer of a going concern (TOGC), and then no VAT is charged at all. Under HMRC’s Notice 742A, for an opted building the buyer must normally:
- Register for VAT, or be required to be registered.
- Opt to tax the building itself, and notify HMRC of that option so it is effective on or before the relevant date, which is normally completion, but can be the date a deposit is paid on exchange unless a stakeholder holds it.
- Tell the seller, by the same date, that its option will not be disapplied by the anti-avoidance rules.
- Continue the same letting business, with the tenancy in place.
Missing a step can turn a VAT-free deal into a £120,000 bill. Agree the VAT position in the heads of terms and have your solicitor and accountant check it before exchange.
Budget too for a building survey, any broker fee, insurance from completion, Land Registry fees and searches, and a cash reserve for voids and repairs, which the next sections put a figure on.
Worked example: does the deal pay?
Worked example: first-year returns on the £600,000 unit
The company from the sizing example completes with a £420,000 loan at 7.25% fixed for five years. It puts in £218,800 of cash and pays no VAT because the sale is a transfer of a going concern. Under the full repairing lease the tenant pays repairs, insurance and business rates, so the company’s own costs, such as accountancy, management and a small repairs allowance, are about £2,500 a year. Corporation tax is taken at the 19% small profits rate. All figures are illustrations.
| Capital repayment over 20 years | Interest only | No mortgage | |
|---|---|---|---|
| Cash put in | £218,800 | £218,800 | £632,500 |
| Rent | £45,000 | £45,000 | £45,000 |
| Landlord costs | £2,500 | £2,500 | £2,500 |
| Mortgage payments | £39,835 | £30,450 | None |
| Of which interest | £30,132 | £30,450 | None |
| Taxable profit | £12,368 | £12,050 | £42,500 |
| Corporation tax at 19% | £2,350 | £2,290 | £8,075 |
| Cash left after tax | £315 | £9,760 | £34,425 |
| Loan repaid in the year | £9,703 | None | None |
| Cash plus loan repaid, as a return on cash put in | About 4.6% | About 4.5% | About 5.4% |
What the numbers show. At a 7.5% yield and 7.25% borrowing, the mortgage barely adds anything to the return. Buying outright would have earned about 5.4% on the cash, against about 4.5% with a mortgage. That is negative leverage: when the cost of debt is close to or above the property yield, borrowing more lowers the return on your own money and adds risk. Leverage helps when the yield is well above the interest rate, or when you expect the rent and value to rise.
Capital repayment or interest only. On capital repayment the company has only about £300 of spare cash a year, but it pays the loan down by almost £10,000, and after five years the balance would be about £363,600. Interest only leaves about £9,800 a year in cash, but the whole £420,000 is still owed. Both are reasonable choices, but interest only needs a credible plan to repay or refinance, and leaves less room if the value falls.
Run your own figures through the commercial mortgage calculator. Repayments are on a standard monthly basis. The tax line ignores the arrangement fee, capital allowances and the effect of the associated companies rules on the small profits rate, so ask your accountant for the real figure.
When the tenant leaves: pricing the void
The biggest risk in commercial property is an empty building. A business tenant can take months to replace, the new one will usually want a rent-free period, and the mortgage payments carry on throughout. Unlike a flat, an empty commercial unit also attracts business rates once the initial relief runs out.
Worked example: the tenant uses its break
The engineering firm uses its break clause and leaves. These assumptions are illustrations: the unit is empty for nine months, the new tenant signs a 10-year lease at the same rent with six months rent free, and empty business rates would be £1,500 a month.
- Mortgage payments for 15 months without rent: about £49,800.
- Empty business rates: industrial property in England gets six months of empty property relief, other property three, so three months at full rates is about £4,500. The new tenant pays rates during its rent-free period.
- Insurance, security and utilities while empty: about £1,500.
- Letting agent and legal fees on the new lease: about £6,500.
- Total: about £62,300, or about 17 months of the building’s rent.
On top of that, the five-year fix ends soon after. A lender will refinance a let building far more readily than an empty one, so a long void near the end of a fix can mean refinancing on worse terms, or onto a bridging loan.
Practical protections:
- Keep a reserve. Many experienced investors hold six to twelve months of mortgage payments, more for a single-let building.
- Time the loan to the lease. Avoid a fixed rate that ends just after a lease end or break. Ask about early repayment charges in case you need to sell or refinance during a void.
- Talk to the tenant early. A tenant approaching a break may agree to remove it in exchange for a rent-free month. That can cost less than a void and lift the building’s value.
Semi-commercial and mixed-use property
A semi-commercial building combines commercial and residential space, most often a shop with one or two flats above. Many lenders like it: the flats are easy to let and value, the income comes from more than one tenant, and rates are often lower than for purely commercial property. Some lenders will go to 75% loan to value or more where the residential part is large.
- Two kinds of tenancy. The shop is let on a commercial lease. The flats are let on residential tenancies. In England, the Renters’ Rights Act changes took effect on 1 May 2026: new residential tenancies are periodic, section 21 no-fault possession has ended, and rent can only be increased once a year through the formal process. Lenders and valuers now assess residential income on that basis.
- Stamp duty. A genuinely mixed-use purchase pays non-residential rates, which are usually lower than residential rates and carry no surcharge for additional homes. On a £350,000 shop with flats, Stamp Duty Land Tax would be about £7,000.
- Regulation. A loan to a limited company is not a regulated mortgage. A loan to an individual secured on a building where at least 40% is used as a dwelling by the borrower or a close family member can be a regulated mortgage contract, with consumer protections and a narrower lender list.
- Tax on the flats. If you own personally, the flats fall under the restriction on finance cost relief for residential landlords, so mortgage interest on that part only earns basic rate relief. Interest on the commercial part, and all interest paid by a company, is deductible in the normal way.
Buying personally, through a company or through a pension
How you hold the building affects the tax, the lenders available and what happens when you sell.
| Structure | How rent is taxed | Lending | Points to check |
|---|---|---|---|
| Personally or jointly | Income tax on the profit at your marginal rate | Most lenders, sometimes regulated if the building has a flat you or a close relative live in | Gains taxed under capital gains tax when you sell. Commercial mortgage interest is fully deductible |
| Limited company or special purpose vehicle (SPV) | Corporation tax: 19% on profits up to £50,000, 25% above £250,000, with marginal relief between | Most lenders. A personal guarantee from the directors is usual | Extracting profit as dividends adds a second layer of tax. Associated companies share the tax thresholds |
| Company letting to your own trading company | As above, but a company letting to a connected person may be a close investment-holding company, taxed at 25% on all profits | Usually assessed as owner-occupied | The lease should be on market terms and properly documented |
| Self-invested pension (SIPP or SSAS) | Rent paid into the pension is free of income tax, and gains free of capital gains tax | A small number of lenders, with pension borrowing limits | Strict rules on connected parties, borrowing and what the scheme can buy. Take specialist advice |
A limited company or SPV is the most common route for investors who plan to hold several buildings, because lenders understand it and the profits are taxed at corporation tax rates while they stay in the company. Lenders will usually want the SPV to do nothing but own property, and will ask the directors to guarantee the loan. As one example, Yorkshire Building Society’s published criteria ask for a personal guarantee of the higher of £175,000 or 10% of the loan. Our guide to personal guarantees explains what you would be signing.
Capital allowances on fixtures
Fixtures such as heating, lighting, lifts and air conditioning can qualify for capital allowances, which reduce the tax on the rent. When you buy a building that already has them, the buyer can only claim if the seller has pooled them and both sides agree a value, usually by an election, within the time limits in the fixtures rules. Raise it before exchange, because it cannot be fixed afterwards.
None of this is tax advice. The right structure depends on how many properties you plan to hold, how you want to take money out and your wider position, so speak to an accountant before you buy.
Energy performance rules for let commercial property
Since 1 April 2023, landlords in England and Wales have not been able to continue letting non-domestic property with an EPC rating below E, unless a valid exemption is registered on the PRS Exemptions Register. The government guidance says the rule applies to all privately rented non-domestic property, even where the tenancy has not changed, and a breach can lead to a financial penalty.
The standard is due to rise for larger buildings. In its June 2026 interim response, the government confirmed that privately rented non-domestic buildings over 1,000 square metres will need to reach EPC B by 2031, where cost-effective, and dropped the earlier proposal for an EPC C step in 2027. Buildings under 1,000 square metres stay at the EPC E minimum, with no set date for a higher standard. The change needs secondary legislation before it takes effect.
Lenders already price this in. Many will not lend on a building rated F or G, some ask for a plan to reach C on buildings rated D or E, and several cut the rate for buildings rated A to C. Check the EPC before you offer, ask what upgrades would cost and who pays under the lease, and treat a poor rating as a reason to negotiate on price.
What lenders ask for
| Area | What lenders usually want | Notes |
|---|---|---|
| Borrower | An individual, a partnership, an LLP or a UK limited company or SPV | Many lenders want UK-resident directors and shareholders |
| Experience | Often a track record of owning or managing commercial property | Some lenders want two years or more. First-time investors have fewer lenders and may need a lower loan to value |
| Deposit and costs | Usually 25% to 40% of the price, plus costs, from your own funds | Lenders check the source of the money. Borrowing the deposit elsewhere is often not allowed |
| The lease | A copy of every lease, rent schedule, arrears history and any side letters | The lender’s solicitor will report on each one |
| The tenant | Accounts or credit information for the main tenants | A parent company guarantee or rent deposit helps |
| Your finances | Personal and company accounts, a schedule of property owned and the debts on it, and bank statements | Experienced landlords are often asked for portfolio cash flow |
| Credit records | Clean company and personal credit files | Specialist lenders will consider explained past problems, at a higher rate |
| The building | A valuation by the lender’s panel surveyor and a valid EPC | The lender may also ask for a building survey or environmental report |
Most investment loans start from about £100,000 to £300,000, depending on the lender. Smaller loans are possible but the choice narrows and fees take a bigger share. Our guide on how to get a commercial mortgage lists the documents in more detail.
How to get a commercial buy to let mortgage, step by step
A straightforward investment purchase usually takes about 8 to 16 weeks from accepted offer to completion. Lease reviews, title issues and VAT questions are the common causes of delay.
- Set your budget. Work out the cash you can commit, including stamp duty, fees and a reserve, before you start looking.
- Test each building. For every property you consider, run the value test and the rent test using the lower of passing and market rent, and work out the cash return after the mortgage.
- Read the lease early. Ask the agent for the lease, rent history and tenant details before you offer. Check the unexpired term, breaks, repairing terms and rent reviews.
- Agree heads of terms. Include the price, the VAT position and whether the sale will be a transfer of a going concern, and what is included.
- Get an agreement in principle. Approach your bank, a challenger bank or specialist lender, or a broker, with the lease summary and your figures.
- Set up the structure. Form the SPV if you are using one, open its bank account and register it for VAT and opt to tax if needed. Allow time, as VAT registration can take weeks.
- Valuation and survey. The lender instructs its valuer. Consider your own building survey, especially if any repairs fall on the landlord.
- Formal offer. Check the rate, fees, covenants, early repayment charges, guarantee and any conditions about the lease or the tenant.
- Legal work. Your solicitor investigates title and the leases. The lender’s solicitor reports on them too. Answer their questions quickly.
- Exchange and complete. Make sure the VAT and capital allowances points are settled before exchange. On completion, tell the tenant where to pay the rent.
- After completion. Register for and pay stamp duty within 14 days in England, diarise the lease events, keep the reserve topped up and send the lender any information the loan requires.
Risks, covenants and what happens if the loan goes wrong
- Loan covenants. Investment loans often include ongoing tests, such as a maximum loan to value or a minimum interest cover, checked each year. If a tenant leaves or values fall, you can breach them even while you keep paying. A breach can let the lender raise the rate, ask for repayment or require you to pay down the loan.
- Rent assignment. Some lenders take an assignment of the rent, so that on default the tenant can be told to pay the lender directly.
- Receivers. Commercial mortgages usually allow the lender to appoint a receiver to collect the rent or sell the building without a court order. The receiver acts for the lender, not you.
- Personal guarantees. If the sale does not clear the debt, the lender can pursue guarantors for the shortfall.
- Interest rate risk. A rise in rates at the end of a fix can push the interest cover below the lender’s minimum, which makes refinancing harder and can force a smaller loan.
- Value risk. Commercial values move with interest rates and demand. A fall can leave you unable to refinance at the same loan to value.
Speak to the lender early if the rent or the tenant is in doubt. Many banks follow the Lending Standards Board’s Standards of Lending Practice for business customers. A temporary switch to interest only, a covenant waiver or a longer term is easier to agree before a default. Our guide to business loans secured against property explains how charges and enforcement work.
Alternatives and related routes
| Route | When it fits | How it compares |
|---|---|---|
| Commercial bridging loan | A vacant building, a quick auction purchase or a refurbishment before letting | Fast and flexible but dearer, for months not years. Needs a clear exit onto a term loan |
| Owner-occupied commercial mortgage | Your own business will occupy the building | Assessed on your trading profits, and usually cheaper |
| Commercial remortgage | You already own a let building and want a better rate or to raise capital | Most of the same tests, without the stamp duty |
| Second charge or further advance | Raising a deposit or capital from a building you already own | Adds borrowing on top of an existing mortgage, usually at a higher rate |
| Buying outright | You have the cash and the yield is close to the cost of borrowing | No lender, no covenants and, in our example, a higher cash return, but your capital is tied up |
Our guide to commercial loans compares every main type of business borrowing on size, term, security and cost.
Where Business Loan Advice fits
We are not a lender and we do not give personal advice. We are preparing a service that will introduce UK limited companies directly to lenders, including for commercial mortgages on let property. No lenders are confirmed yet, so we cannot currently obtain quotes or make introductions. You will not pay us a fee. If a lender pays us commission after the service launches, we will tell you before asking your permission to refer you. The service will not cover individuals, sole traders or partnerships.
In the meantime, the commercial mortgage calculator and these guides are free to use with no sign-up. If your limited company is planning to buy or refinance an investment property, you can register its interest and we will contact you about the service launch. Read how we are paid for the details.
Common questions
What is a commercial buy to let mortgage?
A long-term loan to buy or refinance commercial property that you let to a tenant, such as a shop, office or industrial unit. It is also called a commercial investment mortgage. The lender relies mainly on the rent, the lease and the tenant, rather than your own trading profits.
How much deposit do I need for a commercial buy to let mortgage?
Usually 25% to 40% of the price, because most lenders lend up to about 60% to 75% of the value. Add stamp duty, valuation, legal and arrangement fees. In our £600,000 example, the total cash needed was about £218,800, or about 36% of the price.
How much can I borrow on a commercial investment property?
The lower of a loan to value limit, usually 60% to 75%, and what the rent supports. Lenders typically want the rent to cover the interest by at least 125% at a stressed rate. In our example, £45,000 of rent on a £600,000 unit supported a £420,000 loan, but £34,000 of rent supported only about £375,000 interest only.
What interest rate will I pay on a commercial buy to let mortgage?
In October 2026, most commercial investment loans cost about 6.5% to 8.5% a year on a five-year fix, with semi-commercial often lower and specialist property higher. Investment loans usually cost more than owner-occupied ones. The lease, tenant, building, loan to value and your experience all move the rate.
What is the interest cover ratio on a commercial mortgage?
The annual rent divided by the annual interest, usually calculated at a stressed rate rather than the actual one. A ratio of 125% means the rent is a quarter more than the interest. Lenders commonly ask for 125% to 150%, depending on the tenant, the lease and the property.
Can I get a commercial buy to let mortgage on interest only?
Often, at least in part. Some lenders offer full interest only and others part and part, where some of the loan is repaid over the term. Interest only lowers the monthly cost and can raise the amount the rent supports, but the whole balance must be repaid or refinanced at the end.
Can a first-time investor get a commercial buy to let mortgage?
Yes, but with fewer lenders. Some want two years or more of experience owning commercial property. A first-time investor may need a lower loan to value, a strong tenant on a long lease and a personal guarantee, and may pay a slightly higher rate.
Do I pay stamp duty on a commercial investment property?
Yes. In England and Northern Ireland, non-residential rates are 0% up to £150,000, 2% to £250,000 and 5% above, with no surcharge for additional homes. Scotland and Wales have their own rates. On £600,000 that is £19,500 in England. If VAT is charged on the price, stamp duty is charged on the VAT too.
Do I pay VAT when buying commercial property?
Only if the seller has opted to tax the building. Then VAT is 20% of the price, unless the sale qualifies as a transfer of a going concern. For a let building, that usually means the buyer registers for VAT, opts to tax and notifies HMRC by the relevant date, and continues the letting. Check the position before exchange.
Can I buy commercial property through a limited company?
Yes, and many investors use a special purpose vehicle that only owns property. Profits are taxed at corporation tax rates while they stay in the company, and most lenders accept the structure, usually with a personal guarantee from the directors. Take tax advice on extracting profits and on your wider position.
What happens if my commercial tenant leaves?
You keep paying the mortgage while the building is empty, plus business rates once the empty property relief ends, and the next tenant will usually want a rent-free period. In our example a nine-month void cost about £62,300. Keep a cash reserve and time the loan around lease ends and breaks.
Is a commercial buy to let mortgage regulated?
Usually not. Loans to limited companies and loans secured on purely commercial property are outside the FCA mortgage rules. A loan to an individual secured on a semi-commercial building where at least 40% is used as a home by the borrower or a close relative can be regulated.
Can I get a commercial mortgage on a vacant building?
It is hard to get a term investment loan on an empty building, because there is no rent to test. Buyers often use a commercial bridging loan to buy, let or refurbish it, then refinance onto a commercial buy to let mortgage once a tenant has signed a lease.
Is a semi-commercial mortgage cheaper than a commercial one?
Often, yes. A shop with flats above has income from several tenants, and the flats are easy to let and value, so many lenders offer lower rates and sometimes higher loan to value than for purely commercial property. Allica Bank’s published October 2026 rates were 6.30% to 7.15% for semi-commercial investment against 7.90% to 8.10% for commercial investment.
Bank of England: Bank Rate, 3.75% after the 17 September 2026 decision
Yorkshire Building Society: commercial investment mortgage criteria, checked 23 October 2026
GOV.UK: Stamp Duty Land Tax, non-residential and mixed-use rates
Revenue Scotland: Land and Buildings Transaction Tax, non-residential property
Welsh Government: Land Transaction Tax rates and bands
HMRC: Opting to tax land and buildings (VAT Notice 742A), including transfers of a going concern
Landlord and Tenant Act 1954, Part II: security of tenure for business tenants
GOV.UK: business rates relief for empty buildings
GOV.UK: non-domestic private rented property minimum energy efficiency standard, landlord guidance
GOV.UK: Renters’ Rights Act, an overview for landlords
FCA Handbook PERG 4.4: what is a regulated mortgage contract
GOV.UK: changes to tax relief for residential landlords
GOV.UK: Corporation Tax rates and allowances
Corporation Tax Act 2010, section 34: close investment-holding companies
Capital Allowances Act 2001, section 187A: fixtures, pooling and fixed value requirements
Law of Property Act 1925, section 101: a mortgagee’s powers, including appointing a receiver
Lending Standards Board: the Standards of Lending Practice
Rates, tax bands and lender criteria change. Confirm the current details with the lender, your solicitor or your accountant before relying on them.