Published and reviewed 9 October 2026. General information, not advice. Figures are illustrations, not lender quotes.
The short version
- Most lenders cap a commercial mortgage at around 60% to 75% of the property value, so plan for a deposit of 25% to 40%.
- Two tests set the loan: loan to value, and whether the business profits or the rent cover the repayments with room to spare. The lower answer wins.
- Budget for more than the deposit. Stamp duty, valuation, legal work and fees took the cash needed in our example from 30% to about 35% of the price.
- Expect the process to take weeks to months. Having accounts, management figures and property details ready is the easiest way to save time.
- A loan to a limited company usually sits outside FCA mortgage regulation, so read the facility letter, covenants and any personal guarantee closely.
What a commercial mortgage is, and who it suits
A commercial mortgage is a long-term loan secured on commercial property. Businesses use one to buy the premises they trade from, to buy a property to let to other businesses, or to refinance a property they already own. It works like a home mortgage in outline: you borrow against the property, repay over an agreed term and the lender can take the property if the loan is not repaid. The detail is different. Underwriting looks at the business as well as the building, terms are usually shorter, and the agreement often contains ongoing conditions called covenants.
There are two broad kinds, and lenders treat them differently.
| Type | What it is | What repays the loan | What lenders focus on |
|---|---|---|---|
| Owner-occupied | Your company buys premises it will trade from, such as a workshop, office, clinic, shop or warehouse. | Profits from the trading business. | Trading history, profitability, cash flow and how essential the premises are to the business. |
| Investment | Your company buys a commercial property to let to tenants. | Rent from the tenants. | The lease length, the tenant’s strength, the rent compared with the interest, and your property experience. |
Mixed-use or semi-commercial property, such as a shop with a flat above, sits between the two. Some lenders treat it as commercial and some as residential, depending on how much of the building is residential and who lives there. Our upcoming introduction service is limited to UK limited companies and excludes residential-property security, so a building with a residential element falls outside it, even though the guidance below still applies.
If you only need a smaller sum for fit-out or equipment rather than the building itself, asset finance or a small business loan may suit better. Our commercial mortgages overview covers the product in brief, and our guide to commercial loans compares it with bridging, development finance and the other options.
How much can you borrow? The two tests
Lenders size a commercial mortgage using two separate tests, and the smaller answer sets your maximum loan. Knowing both before you make an offer on a property is the single most useful piece of preparation.
Test one: loan to value
Loan to value (LTV) is the loan as a percentage of the property value. A £280,000 loan on a £400,000 building is 70% LTV. Lenders publish a maximum for each property type, and for most mainstream commercial lending it falls somewhere between 60% and 75%. Specialist or harder-to-sell buildings, such as pubs, petrol stations or purpose-built leisure sites, usually attract a lower maximum because they are harder to sell if the loan goes wrong.
Two details catch people out. First, the lender uses its own valuer’s figure, and if the valuation comes in below the price you agreed, the loan is based on the lower number. Second, the maximum is a ceiling, not an entitlement. A younger business, a weaker credit record or an unusual building can all bring the offered LTV down.
Test two: affordability
The lender then checks that the repayments are comfortably covered. How it does that depends on the type of mortgage.
- Owner-occupied: lenders compare the business’s earnings with the yearly repayments, often using EBITDA (earnings before interest, tax, depreciation and amortisation) after adding back the rent you will no longer pay once you own the building. This is the debt service cover ratio. Required cover varies by lender and sector, and figures of about 1.25 to 1.5 times the annual repayments are common reference points.
- Investment: lenders compare the rent with the interest, using an interest cover ratio. Specialist lender criteria commonly ask for the rent to be around 125% to 150% of the interest, worked out at a stressed rate above the rate you will actually pay.
Worked example: which test wins?
A limited company wants to buy a £400,000 freehold unit. These are assumptions for the illustration, not a quote: 70% maximum LTV, a 6.5% interest rate, a 20-year capital repayment term, a cover ratio of 1.4 times for the owner-occupier, and 130% interest cover at a 7% stressed rate for the investor.
- LTV limit: 70% of £400,000 = £280,000.
- Owner-occupier affordability: £280,000 over 20 years at 6.5% costs about £2,088 a month, or £25,051 a year. At 1.4 times cover, the lender would want to see adjusted earnings of about £35,100 a year. A business earning less than that would be offered a smaller loan or asked for a bigger deposit.
- Investor with £30,000 rent: £30,000 divided by 130%, divided by 7%, supports interest on about £329,700. The LTV limit is lower, so LTV sets the loan at £280,000.
- Investor with £22,000 rent: the same sum supports only about £241,800. Here the rent sets the loan, and the buyer needs about £158,200 of deposit rather than £120,000. Our guide to commercial buy to let mortgages covers the rent and lease tests in detail.
Run your own version with our commercial mortgage calculator. Change the deposit to see the LTV move, then check the monthly figure against your own earnings or rent.
How much deposit do you need?
Because most lenders lend up to about 60% to 75% of the value, the usual commercial mortgage deposit is about 25% to 40% of the purchase price. The exact figure comes from the lower of the two tests above, so a strong LTV limit does not help if affordability is the tighter test.
A bigger deposit tends to do more than reduce the loan. Lower LTV borrowing is less risky for the lender, which can mean a lower margin, more lenders willing to look at the deal and more room if the valuation comes in low.
Can you get a commercial mortgage with no deposit?
A 100% commercial mortgage secured on the purchased building alone is very rare. Where buyers borrow the whole price, it is usually because the lender takes extra security, such as a charge over another property the company owns, or because part of the deposit comes from a separate source like a business loan or a director’s loan to the company. Each of those adds risk or cost. Borrowing the deposit increases the total monthly commitment, and extra security puts another asset on the line. Lenders will also ask where the deposit comes from, so be ready to show the source.
The cash you need on day one
The deposit is the largest cost, but not the only one. Most of the other costs are payable before or at completion, and some, such as the valuation, are payable even if the purchase falls through.
- Stamp Duty Land Tax in England and Northern Ireland, at non-residential rates: nothing on the first £150,000, 2% on the portion from £150,001 to £250,000, and 5% above £250,000. Scotland charges Land and Buildings Transaction Tax and Wales charges Land Transaction Tax instead, with their own bands.
- VAT may be added to the price if the seller has opted to tax the building. A VAT-registered buyer can often reclaim it, but it still has to be funded at completion, and stamp duty is charged on the VAT-inclusive price. Some sales of let property can be treated as a transfer of a going concern with no VAT. Ask your solicitor and accountant early.
- Valuation fee: paid to the lender’s valuer, scaled to the property value and complexity.
- Legal fees: your solicitor, and usually the lender’s solicitor too. In commercial lending the borrower normally pays both.
- Arrangement fee: often around 1% to 2% of the loan. Some lenders allow it to be added to the loan, which means paying interest on it.
- Broker fee: if you use one, ask how they are paid, whether a lender pays them commission, and when any fee is due.
- Surveys and searches: a building survey, environmental search and, for some buildings, asbestos or specialist reports.
Worked example: total cash for a £400,000 unit in England
| Item | Amount | How it is worked out |
|---|---|---|
| Deposit | £120,000 | 30% of £400,000, with a 70% LTV loan of £280,000 |
| Stamp Duty Land Tax | £9,500 | £0 on £150,000, then £2,000 on the next £100,000 and £7,500 on the last £150,000 |
| Arrangement fee | £2,800 | Assumed at 1% of the loan |
| Valuation, legal and surveys | £8,000 | An assumed allowance for this example. Get real quotes. |
| Total | £140,300 | About 35% of the price, before any VAT, fit-out or moving costs |
The figures assume no VAT on the price. If VAT were charged at 20%, the buyer would need another £80,000 at completion, and stamp duty would rise because it is charged on the higher price.
Keep a cash buffer after completion too. Buying premises often comes with fit-out, insurance, business rates and repairs that the previous lease may have covered.
What decides the interest rate?
There is no standard commercial mortgage rate. Each lender prices the individual deal, and two businesses buying similar buildings can be offered very different terms.
Variable rates are usually set as a margin above Bank Rate. The Bank of England held Bank Rate at 3.75% on 17 September 2026, and its next decision is due on 5 November 2026. Fixed rates are priced from the market cost of fixing money for the chosen period, plus the lender’s margin, so they can move between Bank Rate decisions.
The margin reflects how risky the lender thinks your loan is. Our guide to commercial mortgage rates shows typical current rates by property type and loan to value, and our guide to business loan interest rates compares commercial mortgage pricing with other business finance. The main factors are:
- Loan to value: lower LTV usually means a lower margin.
- The property: a modern unit or office in a strong location is easier to sell than a specialist building.
- The income: years of trading profit for an owner-occupier, or the lease length and tenant quality for an investor.
- The people: credit history, property experience and the strength of any guarantee.
- The structure: loan size, term, repayment type and whether the rate is fixed.
Test what a higher rate would do. In our example, £280,000 over 20 years costs about £2,088 a month at 6.5% and about £2,256 at 7.5%. That one percentage point adds roughly £2,000 a year and about £40,300 over the full term. If the rate is variable, make sure the business could absorb that kind of rise.
Our guide on comparing business loans explains how to put offers side by side on total cost, not just the rate.
How to get a commercial mortgage: step by step
Each lender has its own process, but most applications move through the same stages. Some can run at the same time.
- Check your own numbers. Pull together the last two or three years of accounts, current management figures and a 12-month cash flow forecast. Work out what you can put in as a deposit and costs, and still keep a sensible cash buffer.
- Size the loan before you fall for a building. Apply the two tests above to a realistic price range, and use the calculator to see the monthly cost at a few different rates.
- Decide how you will approach lenders. You can go directly to a bank or specialist lender, or use a broker. Whichever you choose, check who you are dealing with, and use the FCA Register for any firm that says it is authorised.
- Get an agreement in principle. Many lenders will give an indicative view on a short application and initial figures. It is not a promise to lend, but it tells you whether the deal is realistic and gives the seller more confidence.
- Agree the purchase. Once your offer is accepted, the agents usually issue heads of terms setting out the price and main conditions. Instruct a commercial property solicitor at this point.
- Make the full application. The lender will ask for the documents in the checklist below, run credit checks on the company and usually its directors, and may want to meet you or visit the business.
- Valuation. The lender instructs a surveyor to value the property. You pay for this, and it can take a couple of weeks to arrange and report. A down-valuation means renegotiating the price or finding more deposit.
- Underwriting and credit approval. The lender’s team reviews the whole case, often with a credit committee. Expect questions. Quick, complete answers keep things moving.
- Review the facility letter. This is the formal offer. Check the rate, fees, term, repayment type, security, guarantees, covenants and early repayment charges. Have your solicitor go through it with you before you sign. Our guide to commercial mortgage quotes explains each line and how to compare offers.
- Legal work and completion. Both sets of solicitors carry out searches, report on title, draft the charge and agree the conditions to be met before the money is released. On completion, the loan is drawn and the purchase goes through.
How long does it take?
A straightforward purchase often takes about six to twelve weeks from application to completion, and complex deals can take several months. The usual causes of delay are missing documents, slow valuations, title problems and questions from the lender that sit unanswered. If you have a fixed completion date, such as the end of a lease, tell the lender at the start and work backwards from it.
What lenders will ask for
Lenders vary, but having this pack ready before you apply is one of the best ways to save time.
About the company
- Two to three years of filed accounts and the latest management accounts.
- Recent business bank statements, often the last six months.
- A cash flow forecast, ideally with the new mortgage and any change in rent included.
- Details of existing borrowing, leases and finance agreements.
- Recent tax returns or computations, if requested.
- Company details, including the registration number, shareholders and directors. Lenders check Companies House, so make sure the filings are up to date.
About the people
- Proof of identity and address for each director and significant shareholder.
- A summary of each director’s assets and liabilities, particularly if a personal guarantee is likely.
- A short summary of relevant experience, which matters especially for property investors.
About the property
- The sales particulars, agreed price and heads of terms.
- For investments, the leases, the rent roll and details of the tenants.
- Any plans for works or change of use, with costs.
- For a refinance, the current lender, the balance outstanding and any early repayment charges.
A one-page summary of what the company does, why it needs the property and how the loan will be repaid makes the lender’s job easier and helps your application make sense quickly. Our borrowing checklist walks through the same preparation for any type of business finance.
Repayment types, terms and covenants
Capital repayment, interest-only, or part and part
With capital repayment, every payment includes some of the loan, and the balance reaches zero at the end of the term. With interest-only, you pay just the interest, and the whole loan is still owed at the end. That needs a credible plan, such as selling the property or refinancing. In our example, interest-only on £280,000 at 6.5% would cost about £1,517 a month against £2,088 on capital repayment, but none of the debt would be repaid. Many lenders also offer part and part loans, which mix the two.
How long can a commercial mortgage be?
Terms commonly run from about 3 to 25 years, and some lenders go further. A longer term lowers the monthly payment but increases the total interest. On our £280,000 example at 6.5%, a 15-year term costs about £2,439 a month and a 25-year term about £1,891. Some loans have a shorter term than their repayment profile, leaving a balance, called a balloon, to refinance at the end.
Covenants and reviews
Commercial facility letters often include covenants, ongoing tests the business must keep passing. Common examples are a maximum LTV, a minimum interest or debt service cover, and a duty to supply annual accounts. A falling valuation or a weak year can breach a covenant even when every payment has been made on time, and that can give the lender the right to change terms or ask for repayment. Ask how each covenant is tested, how often and what happens if it is missed.
Early repayment
Fixed-rate loans in particular may carry early repayment charges or break costs if you sell, refinance or overpay. Ask for an example of the charge in pounds before you sign.
Personal guarantees and other security
The lender will take a legal charge over the property. Many will also ask the directors of a smaller company to give personal guarantees, which means you could be personally liable if the company cannot repay. A guarantee can be limited to a set amount or unlimited, and it may cover other borrowing too.
Ask whether a guarantee is needed, whether it can be capped and how you would be released from it. Get independent legal advice before signing. Our personal guarantees guide sets out the questions to ask.
Is a commercial mortgage regulated?
Usually not in the way a home mortgage is. FCA mortgage regulation mainly protects individuals and trustees borrowing against property that is at least 40% used as a home. A loan to a limited company to buy commercial premises generally falls outside it. That means the protections you may know from a residential mortgage, such as a regulated affordability assessment and mortgage conduct rules, may not apply.
Some lenders and brokers are FCA-authorised for other activities, and some smaller businesses can take complaints to the Financial Ombudsman Service, so check what applies before you rely on it. In practice, the facility letter is your main protection. Read it carefully and have a solicitor explain anything you are unsure of.
Why applications stall, and how to avoid it
| Problem | Why it matters | What helps |
|---|---|---|
| Short or uneven trading history | The lender has less evidence that profits will cover the repayments. | Up-to-date management accounts, a realistic forecast and explanations of any dips. A larger deposit can offset some risk. |
| Down-valuation | The loan is based on the lower value, so the deposit needs to rise. | Keep funds in reserve, check comparable sales and be ready to renegotiate the price. |
| Credit problems | Missed payments or County Court Judgments on the company or directors reduce lender choice. | Explain the history openly, show it is resolved and approach lenders that consider it. |
| Tight cover | Earnings or rent only just cover the repayments at the stressed rate. | Reduce the loan, extend the term or show the rent you will stop paying as an owner-occupier. |
| Specialist property | Fewer lenders will consider it and maximum LTV is lower. | Expect a bigger deposit and look for lenders with experience of that sector. |
| Slow paperwork | Delays can push you past the purchase deadline. | Prepare the document pack before you make an offer. |
Alternatives worth weighing
Buying is not always the right move, even when a lender will say yes.
- Keep renting. A lease keeps cash in the business and gives you flexibility to move. Compare the total cost of ownership, including repairs, rates and the money tied up in the deposit, with your rent.
- Refinance or raise on property you already own. A secured business loan against existing commercial property may fund growth without a new purchase.
- Bridging finance. Short-term lending for auctions, quick purchases or buildings that need work before a mortgage lender will accept them. It is usually more expensive, and it needs a clear exit.
- Buying through a pension. Some directors use a self-invested pension to buy business premises and lease them to the company. The rules are detailed, so take specialist advice.
- Finance the contents, not the building. If the real need is equipment or a fit-out, asset finance may be simpler.
Not sure which route to read about first? Try our funding route finder.
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. 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.
In the meantime, the commercial mortgage calculator and these guides are free to use with no sign-up. If your limited company is planning a purchase, you can register its interest and we will contact you about the service launch. Read how we are paid for the details.
Common questions
Can a limited company get a commercial mortgage?
Yes. Most commercial mortgages are made to limited companies, which buy the property in the company’s name. The lender assesses the company’s accounts and the property, and many lenders also ask directors of smaller companies for personal guarantees.
How much deposit do I need for a commercial mortgage?
Usually about 25% to 40% of the purchase price, because most lenders lend up to around 60% to 75% of the value. Specialist properties, younger businesses and tight affordability can push the deposit higher. Budget separately for stamp duty, fees and any VAT.
Can I get a commercial mortgage with no deposit?
It is rare. Borrowing the full price usually means giving the lender extra security, such as another property the company owns, or funding the deposit from a separate loan. Both add risk and cost, so compare the total commitment carefully.
How long does it take to get a commercial mortgage?
A straightforward purchase often takes about six to twelve weeks from application to completion. Complex properties, missing documents or a slow valuation can make it take several months. Preparing your accounts and property details before you apply saves the most time.
Are commercial mortgage rates higher than residential rates?
Often, because each loan is priced on the business, the property and the loan to value, and commercial property can be harder to sell. A strong business borrowing at a low loan to value may be offered a rate close to some residential deals, but there is no standard rate.
Can a new business get a commercial mortgage?
Some lenders will consider a business with less than two or three years of accounts, especially with a larger deposit, relevant experience and solid forecasts. Choice is narrower and pricing may be higher, so prepare a detailed business plan and cash flow forecast.
Is a commercial mortgage regulated by the FCA?
A commercial mortgage to a limited company is generally not a regulated mortgage contract, so the protections of residential mortgage rules may not apply. Read the facility letter carefully, take legal advice and check whether any firm you deal with is authorised on the FCA Register.
How long can a commercial mortgage term be?
Terms commonly run from about 3 to 25 years, and some lenders go longer. A longer term lowers the monthly payment but increases total interest. Some loans have a shorter term than their repayment profile and leave a balance to refinance at the end.
GOV.UK: Stamp Duty Land Tax rates for non-residential and mixed land and property
Bank of England: Bank Rate maintained at 3.75%, September 2026
HMRC: Opting to tax land and buildings (VAT Notice 742A)
FCA Register: check a firm is authorised
Rates, tax bands and lender criteria change. Confirm the current details with the lender, your solicitor or your accountant before relying on them.