Owner-occupied commercial mortgages: buy your premises

Published and reviewed 5 November 2026. General information, not advice. Figures are illustrations, not lender quotes.

The short version

An owner-occupied commercial mortgage is a loan to buy premises your business trades from. Lenders repay themselves from your trading profits rather than a tenant’s rent, so they usually price it lower than an investment mortgage. Most cap the loan at 60% to 75% of the value.
On our worked £560,000 unit in England, a 70% loan needs a £168,000 deposit, and stamp duty, fees and legal work take the cash needed to about £206,400, or 37% of the price. At 6.85% over 20 years the repayment is about £3,004 a month.
Over ten years, buying beat paying £42,000 a year in rent if the building held its value, by about £42,600 after tax. It broke even if the value fell about 8%. If the cash tied up would otherwise earn 15% a year in the business, renting won unless the value rose about 65%.
Lenders test whether your earnings cover the repayments, adding back the rent you will stop paying. With adjusted earnings of £62,000 and £9,000 of other loan payments, a lender wanting 130% cover would lend about £420,800, but one wanting 150% for a first-time buyer of premises would lend about £361,400.
Settle who owns the building, and the VAT, before you exchange. If the seller has opted to tax, £112,000 of VAT would be added to the £560,000 price and £5,600 to the stamp duty. A business that cannot reclaim VAT, such as a dentist or an insurance broker, would bear that cost for good.

What an owner-occupied commercial mortgage is

An owner-occupied commercial mortgage is a long-term loan, secured on business property, that your business uses to buy premises it will trade from: a workshop, a warehouse, an office, a clinic, a shop or a yard. Repayment comes from the business’s profits. That is the difference from an investment commercial mortgage, where the borrower buys a building to let and the tenant’s rent repays the loan.

Lenders treat the two very differently, so it pays to know which one you are asking for.

Owner-occupied and investment commercial mortgages compared
	Owner-occupied	Investment
Who uses the building	Your business, for most or all of it. Lenders often accept part of it being let, as long as the business occupies the main part.	Tenants who are not connected to you.
What repays the loan	Trading profits.	Rent.
What the lender studies most	Accounts, management figures, cash flow and how settled the business is.	The lease, the tenant and the rent compared with the payments.
Typical price	Usually lower. A business that needs its own building has a strong reason to keep paying.	Usually higher, especially with short leases or weaker tenants.
Typical maximum loan to value	About 60% to 75%, higher for some medical and professional practices.	About 60% to 75%, often lower for interest only.

The borrower is usually the trading company itself, a separate property company owned by the same people, the directors personally or a pension scheme. Lenders often still treat the loan as owner-occupied if a connected company owns the building and lets it to your trading company, but they will look at the trading company’s figures and usually want it to guarantee the loan. We cover the choice in who should own the building.

This guide is for buying premises. If you already own them and want a better deal or to release money, read our guide to commercial remortgages. If you are buying to let to others, read our guide to commercial buy to let mortgages. A building with a flat above the business sits in between, and is covered in our guide on how to get a commercial mortgage.

Rent or buy? A ten-year comparison in pounds

Most owners consider buying because rent feels like money that leaves for good. That is true, but a mortgage has costs that rent does not: interest, stamp duty, fees and the return the deposit could have earned elsewhere. The honest way to decide is to put both in pounds, after tax, over the time you expect to stay.

Worked example: a £560,000 unit against £42,000 a year in rent

A limited company rents a light industrial unit in England for £42,000 a year on a full repairing lease, with a rent review in year five that we assume lifts the rent to £46,500. The landlord will sell it for £560,000, and the seller has not opted to tax, so no VAT is added. The company borrows £392,000, 70% of the price, at 6.85% fixed, repaid over 20 years. All figures are illustrations, not quotes.

Renting for ten years: £442,500 of rent. Rent is a deductible business expense, so at the 25% Corporation Tax main rate the cost after tax is about £331,900.
Buying, the monthly side: repayments of about £3,004 a month, £36,048 a year. Over ten years that is about £360,500, of which about £228,900 is interest and about £131,500 repays the loan. Interest is deductible, so it costs about £171,700 after tax. The capital repaid is not a cost: it becomes equity in the building.
Buying, the upfront side: about £38,400 of stamp duty, fees and legal work (see the cash you need). We treat the £26,500 of stamp duty, legal work and survey as a cost, and the £11,900 of loan fees as deductible over the loan.
The cash tied up: the £206,400 deposit and costs could otherwise have earned interest. At 4% a year before tax, about 3% after, that lost return is about £71,000 over ten years.
Selling after ten years: we allow 2% for selling costs and Corporation Tax at 25% on any gain.

Ten-year cost after tax: renting against buying the £560,000 unit
Value after ten years	Cost of renting	Net cost of buying	Better by
Up 2% a year, to about £682,600	About £331,900	About £189,700	Buying, by about £142,200
Unchanged at £560,000	About £331,900	About £289,300	Buying, by about £42,600
About 7.8% lower, at about £516,500	About £331,900	About £331,900	Break-even
Down 15%, to £476,000	About £331,900	About £371,600	Renting, by about £39,700

The net cost of buying is the after-tax interest, fees, stamp duty and lost return on the cash, plus selling costs and any tax on a gain, less any rise in value. It assumes repairs, insurance and business rates cost about the same whether you rent or own, which is roughly true on a full repairing lease.

The assumption that changes the answer

The biggest swing is not the property market. It is what the £206,400 would have earned if the company had not put it into bricks. We used 4% before tax, roughly a business savings rate. If that cash would instead fund stock, staff or equipment earning 8% a year before tax, buying only breaks even if the building rises about 10% over ten years. At 15%, the value would need to rise about 65%. A growing business that is short of cash is often better off renting and keeping its money working, and a settled business with spare cash is often better off buying.

What the numbers leave out

Control. No rent reviews, no landlord consents for alterations and no risk of the lease not being renewed. For a business with heavy fit-out, specialist machinery or a site customers know, that has real value.
Flexibility. A lease with a break clause lets you move if the business outgrows the unit or shrinks. Selling a building to move can take six months or more.
Concentration. Owning puts more of your wealth in one building, often secured to one lender, in the same place as your business. If trading falls, both can suffer at once.
Dilapidations. A tenant on a full repairing lease usually has to put the building back in repair at the end, which can cost tens of thousands. An owner keeps that money but carries the long-term repair risk.

Run your own version with the commercial mortgage calculator. Put your price and deposit in, then compare the monthly figure with your rent and add the costs above.

The cash you need: deposit and upfront costs

The deposit is the gap between the price and the loan. With most lenders lending 60% to 75% of the value, plan for a deposit of 25% to 40%. Then add the costs of buying and borrowing, which are easy to underestimate and are rarely added to the loan.

Upfront cash for the £560,000 unit in England with a 70% loan
Item	Illustration	Notes
Deposit	£168,000	30% of the price. The lender lends on its own valuer’s figure, so a lower valuation increases the deposit.
Stamp Duty Land Tax	£17,500	Nothing on the first £150,000, 2% to £250,000, 5% above. Different in Scotland and Wales, below.
Lender arrangement fee	£5,880	1.5% of the loan, a common owner-occupier level. Often 1% to 2%.
Valuation	About £3,000	Paid to the lender’s valuer, usually up front and not refundable if the purchase falls through.
Your solicitor	About £6,000	Including VAT. More for a complex title, a leasehold or a large site.
Lender’s solicitor	About £3,000	Commercial borrowers usually pay the lender’s legal costs too.
Survey, searches and environmental report	About £3,000	A building survey is worth having even if the lender does not require it.
Total cash needed	About £206,400	About 37% of the price, before fit-out, moving costs and a cash buffer.

Stamp duty depends on where the property is. Non-residential rates on the same £560,000 purchase:

Tax on a £560,000 non-residential purchase in each nation, November 2026
Where	Tax and bands	Tax on £560,000
England and Northern Ireland	Stamp Duty Land Tax: 0% to £150,000, 2% to £250,000, 5% above	£17,500
Scotland	Land and Buildings Transaction Tax: 0% to £150,000, 1% to £250,000, 5% above	£16,500
Wales	Land Transaction Tax: 0% to £225,000, 1% to £250,000, 5% to £1 million, 6% above	£15,750

Where the money comes from matters to the lender. Company cash, a director’s loan to the company and the sale of another asset are all common. Lenders will want to see the source and will be wary of a deposit that is itself borrowed and adds repayments the business has to cover. A pension scheme can also buy the building, which we explain under who should own it.

Keep a buffer after completion. A business that empties its bank account to buy a building has swapped rent for a cash flow problem. Our guide to working capital finance explains how to size the cash you need to trade comfortably.

How much can you borrow? The two lender tests

Lenders set the loan using two tests, and the lower answer wins: the loan to value, and whether the business’s earnings cover the repayments with room to spare, known as debt service cover.

Test one: loan to value

Most mainstream owner-occupier lending tops out at 70% to 75% of the value. Yorkshire Building Society’s owner-occupier criteria, for example, allow up to 75% on loans of £500,000 to £3 million on a fix. Allica Bank’s product guide dated 24 September 2026 offers owner-occupied loans of £150,000 to £10 million. Specialist trading buildings, such as pubs, hotels and care homes, usually get less, and some lenders go higher for medical and dental practices with secure income.

Test two: debt service cover

The lender compares your earnings with all the yearly loan payments the business will make, including the new mortgage and any existing loans or asset finance. Earnings normally means EBITDA: earnings before interest, tax, depreciation and amortisation. For an owner-occupier, the lender usually adds back the rent you will stop paying, because buying removes it.

Worked example: how far do the profits stretch?

Our company makes EBITDA of £20,000 after paying its £42,000 rent, and pays £9,000 a year on existing asset finance.

Adjusted earnings: £20,000 + £42,000 rent added back = £62,000.
At 130% cover, total loan payments can be up to £62,000 ÷ 1.3 = about £47,700 a year. Less the £9,000 existing finance leaves about £38,700 for the mortgage, enough for a loan of about £420,800 at 6.85% over 20 years. The £392,000 loan passes, with cover of about 138%.
At 150% cover, which Allica’s guide sets for first-time buyers of premises, the mortgage can take about £32,300 a year. Even at its lower 6.50% rate for loans up to 65% of value, that supports only about £361,400, so the company would need a deposit of about £198,600 rather than £168,000.

The same business, building and profits produce a gap of almost £60,000 in borrowing, purely from which lender it asks. Repaying the asset finance first, or choosing a 25-year term, would also lift the figure.

Lenders set the cover and the rate they test it at in different ways. Allica tests at 130% of adjusted EBITDA, or 150% for first-time buyers. Yorkshire Building Society tests at 125%, at 6% or the pay rate. Some lenders test variable rates two points above the pay rate. Ask each lender which earnings figure, which add-backs and which rate it uses.

Earnings must also be believable. Lenders usually want two or three years of filed accounts, current management accounts and a forecast. A dip in profits, a one-off year or heavy reliance on one customer will all be questioned. Our guide to how much a business can borrow explains the same cover test for other loans.

Owner-occupied rates and terms in November 2026

Owner-occupied loans are usually among the cheapest commercial mortgages. Bank Rate stood at 3.75% going into the Bank of England’s 5 November 2026 decision, where it has been since December 2025. Variable rates are priced as a margin over Bank Rate, and fixed rates from the market cost of fixing money for the period, plus a margin.

Most high street banks price each case individually, but some challenger banks publish their rates. These are Allica Bank’s published owner-occupied rates, checked on 5 November 2026, with the repayment on our £392,000 loan over 20 years at each one:

Allica Bank published owner-occupied rates and the monthly repayment on £392,000 over 20 years
Product	Up to 65% loan to value	Over 65% loan to value
Five-year fixed rate	6.50%, about £2,923 a month	6.85%, about £3,004 a month
Variable, Bank Rate plus	2.30%, so 6.05% today, about £2,820 a month	2.65%, so 6.40% today, about £2,900 a month

The rates include a 0.50% discount for using the lender’s business current account for at least half of turnover, so without that account they would be about half a point higher. The lender lists further 0.25% cuts for an EPC rating of A to C, loans over £750,000 and debt service cover of 200% at application. These are one lender’s rates, not a market average: our guide to commercial mortgage rates shows typical ranges of about 6% to 9% for mainstream five-year fixes.

Terms, and what a longer one costs

Terms of 15 to 25 years are typical, and some lenders go to 30. Yorkshire Building Society, for example, lends for 5 to 25 years, but caps loans over £2 million at 10 years. Stretching our £392,000 at 6.85% from 20 to 25 years cuts the payment from about £3,004 to about £2,733 a month, but adds about £99,000 of interest over the life of the loan.

Stress-test the payment

A rise of two points, from 6.85% to 8.85%, would add about £485 a month to the example. If you choose a variable rate or a short fix, check the business could carry that. Early repayment charges on five-year fixes are commonly 5%, 4%, 3%, 2% and 1% of the balance in years one to five, so a fix suits a business that expects to stay. Many lenders allow overpayments of up to 10% a year without charge. Our guide to interest-only commercial mortgages covers the lower-payment option, which some owner-occupier lenders allow for the first few years.

Who should own the building?

This is the decision most owners leave too late, and it is hard to change after completion because moving a property later can mean stamp duty and tax on any gain. There are four common routes.

Four ways to own business premises
Owner	How it works	Points in favour	Points against
The trading company	The company that runs the business buys and occupies the building.	Simplest. Lenders know it well. Profits used for repayments are already in the company.	The building is exposed to the trading company’s creditors. A buyer of the business later may not want the building.
A separate property company	A sister company owned by the same shareholders, or a subsidiary of a holding company, buys it and lets it to the trading company.	Keeps the property apart from trading risk. The trading company and building can be sold separately.	Two sets of accounts. A formal lease and market rent are needed. Lenders will usually want the trading company to guarantee the loan.
The directors personally	One or more directors buy it and let it to the company.	Rent paid by the company is deductible for it, and becomes income for the owners.	Rent is taxed at income tax rates. The property gets less inheritance tax relief. Outside the scope of our introduction service.
A pension scheme (SSAS or SIPP)	The directors’ pension scheme buys it and lets it to the company at a market rent.	Rent paid into the pension is tax-free inside it, and there is no tax on any gain within the scheme. The building is outside the company’s creditors.	Borrowing is capped at 50% of the scheme’s net value. Money is locked in the pension. Strict rules on connected parties. Outside the scope of our introduction service.

Worked example: buying through a pension scheme

Two directors have a small self-administered scheme, a SSAS, with £400,000 of net assets. Under HMRC’s rules, a registered pension scheme can borrow up to 50% of its net value immediately before the borrowing, so this scheme can borrow up to £200,000, giving £600,000 to spend.

The £560,000 unit plus about £32,500 of stamp duty, valuation, legal and survey costs comes to about £592,500, within the £600,000.
The trading company pays the pension a market rent, which is deductible for the company. The scheme uses the rent to repay the loan.
Borrowing over the 50% limit triggers a 40% tax charge on the excess, so the scheme administrator and a pensions adviser must sign off the figures.

Only some lenders lend to pension schemes, and residential property in a pension scheme triggers heavy tax charges, so a building with a flat is usually ruled out.

Tax points to raise with your accountant

When you sell the business. Business Asset Disposal Relief taxes qualifying gains at 18% for disposals from 6 April 2026, up to a £1 million lifetime limit. A building held personally and let to your company can qualify only in limited cases, linked to a sale of the business, and relief can be restricted where a rent was charged.
Inheritance tax. Business Relief for deaths from 6 April 2026 gives 100% relief on qualifying business property up to a £2.5 million allowance, and 50% above it. Land or buildings owned personally and used by a company the owner controls only qualify for 50% relief, while shares in an unlisted trading company can qualify for 100%.
Moving it later. A company buying a property from a connected person is normally charged stamp duty on at least the market value, and the seller may have a gain to tax. Getting the structure right at the start avoids paying twice.

The right answer depends on your shareholders, plans for the business, other assets and pension position. Take advice from an accountant before you make an offer, not after the solicitor asks whose name goes on the contract.

VAT, tax relief and capital allowances

VAT on the price

Commercial property sales are normally exempt from VAT, but the seller can opt to tax the building, and then 20% VAT is added to the price. When a business buys premises to occupy, rather than a let building, the sale is usually not a transfer of a going concern, so the VAT is charged.

Worked example: the same unit with VAT

VAT: 20% of £560,000 = £112,000, payable at completion.
Stamp duty is charged on the price including VAT, £672,000, so it rises from £17,500 to £23,100. That extra £5,600 is never refunded.
A fully VAT-registered business making taxable sales can usually reclaim the £112,000 on its next VAT return, but it must find the money first, typically for one to three months. Most mortgage lenders will not lend on VAT. Our guide to VAT and corporation tax loans explains short-term VAT bridging.
A business that makes exempt supplies, such as a dental practice, a medical clinic, an insurance broker or a private nursery, may reclaim little or none of it. For them the building effectively costs £672,000.

Ask early, before agreeing a price, whether the seller has opted to tax. If you cannot recover VAT, factor it into what the building is worth to you.

What the company can deduct

Mortgage interest on a loan used for the business is normally deductible for Corporation Tax, as are loan fees, spread over the loan. Capital repayments are not deductible: at the 25% main rate, each £1 of capital repaid needs about £1.33 of profit before tax. In year one of our example, the company repays about £9,500 of capital and pays about £26,600 of interest. Stamp duty and legal costs on the purchase are not deductible, but are added to the building’s cost for working out any gain when it is sold.

Capital allowances: claim them, or lose them

Fixtures. Heating, lighting, lifts, air conditioning and similar fixtures in a second-hand building can qualify for allowances, but only if the seller has pooled its own expenditure and the two of you fix a value for the fixtures within two years of the sale, usually by a joint election. This needs to be dealt with in the contract. Miss it and the allowances are often lost for good.
The structure. The Structures and Buildings Allowance gives 3% a year on qualifying construction and renovation costs for buildings where the construction contract was signed on or after 29 October 2018, but not on the land. A buyer can only claim with the allowance statement from the previous owner, so ask for it.
Your own fit-out. Plant and machinery you install can qualify for the Annual Investment Allowance of up to £1 million a year.

What lenders check, and what to prepare

An owner-occupier application is mostly about the business. The building is the security, but the lender is really lending against your ability to keep trading and paying.

What owner-occupier lenders look at
Area	What they want to see	What helps
Trading record	Usually two or three years of filed accounts, and a profitable, stable trend.	Up-to-date management accounts and a short explanation of any dip.
Affordability	Adjusted earnings covering all loan payments by about 125% to 150%.	Clearing small, expensive debts before applying. A forecast showing the saving from rent.
The building	A clear title, a valuation that supports the price, and a type of building the lender is happy with.	A building survey, a good EPC rating, and no unusual planning or environmental issues.
The people	Clean credit records for the company and the directors, and experience running the business.	Explaining any past credit issue up front. Our guide to bad credit business loans covers how lenders read them.
Security and guarantees	A first legal charge over the property, often a debenture, and often personal guarantees.	Negotiating the size of any guarantee. Yorkshire Building Society’s criteria, for example, ask for a guarantee of at least £175,000 or 10% of the loan.

Energy performance

The rules that stop landlords letting buildings rated below EPC E do not apply to premises you occupy yourself, but lenders care. Yorkshire Building Society asks for a rating of A to C, or D or E with a plan to reach C, and Allica cuts its rate for A to C. A poor rating can also hurt the value if you later sell or let.

Trading buildings

Pubs, hotels, care homes, nurseries, petrol stations and similar buildings are valued largely on the trade they support. Lenders look harder at trading figures, and many lend a lower percentage of the value. Expect fewer lenders and a higher rate.

Documents to have ready

Two or three years of filed accounts and the latest management accounts.
Business bank statements, usually for six to twelve months.
A 12 to 24 month forecast showing the mortgage payments and the rent you will save.
A schedule of existing borrowing, including asset finance and director’s loans.
The property details, the agreed price, the agent’s particulars and any survey.
Proof of where the deposit is coming from.
Identification and personal financial statements for the directors and main shareholders.

Our guide on how to get a business loan explains why applications are declined and how to avoid the common causes.

Buying your premises step by step

Run the numbers. Use the commercial mortgage calculator to compare the repayment with your rent, then add the upfront costs and test the rate two points higher.
Decide who will own it. Agree the structure with your accountant before you make an offer.
Check the VAT position and the lease. Ask whether the seller has opted to tax. If you are buying the building you rent, check how your lease ends and whether any dilapidations claim is settled in the price.
Get an agreement in principle. Speak to lenders with your accounts and the property details. Ask about loan to value, cover, rate, fees, term and guarantees. Allow a week or two.
Agree the price, subject to contract and finance.
Apply and pay for the valuation. The lender instructs a valuer, usually within one to three weeks.
Receive the offer. Read the facility letter, covenants and guarantee terms closely. Our guide to commercial mortgage quotes explains each line, and our guide to personal guarantees explains what you would be signing.
Legal work. Your solicitor deals with title, searches, enquiries and the fixtures election. The lender’s solicitor deals with the charge.
Exchange and complete. Pay the deposit, any VAT and the stamp duty, which in England is due within 14 days of completion.

From first conversation to completion, owner-occupier purchases commonly take 8 to 16 weeks, longer for a large or unusual building. If you need to move faster, for example at auction, our guide to commercial bridging loans explains how a bridge followed by a mortgage works and what it adds to the cost.

The risks, and the alternatives

Buying ties the business to one place, one lender and one large commitment. Before you do it, be clear what happens if things change.

If trading falls. The mortgage payment does not fall with sales. Rent reviews stop, but so does the option to hand back the keys at a break date.
If you outgrow the building. You may need to sell, let it and rent elsewhere, or borrow again. Letting it out turns it into an investment property, which the lender may need to approve and may reprice.
If the value falls. Office and some retail values fell in recent years. On a loan with covenants, a fall in value can put you in breach even if every payment is made. Check whether the lender can revalue.
If the business is sold. A buyer may want the business without the building, or the building without a long lease. Thinking about this now affects the choice of owner.

Alternatives to an owner-occupied mortgage
Option	When it can suit
Stay renting, on a longer lease	Cash is better used in the business, or you value flexibility. Negotiate a rent-free period or break clause.
Buy and release cash later	You already own premises: a loan secured against the property or a remortgage can fund growth.
Sale and leaseback	You own the building and want to free all the equity in it while staying in occupation.
Bridging, then a mortgage	You need to buy quickly, or the building needs work before a mortgage lender will lend.
Asset finance for the fit-out	The building is affordable but the machinery and fit-out stretch the cash. Our guide to how asset finance works explains the options.

Regulation and protection

A commercial mortgage to a limited company is generally outside the Financial Conduct Authority’s mortgage rules. A loan is a regulated mortgage contract only when the borrower is an individual or trustees and at least 40% of the property is used, or intended to be used, as a home by the borrower or a close relative. That can apply to a sole trader buying a shop with a flat they will live in.

Unregulated does not mean unprotected. Many business lenders follow the Standards of Lending Practice for business customers, and smaller businesses may be able to take a complaint to the Financial Ombudsman Service. Check the lender and any broker on the FCA Register.

The property is security. If the business cannot pay, the lender can enforce its charge and sell the building, and pursue any guarantors for a shortfall. If trading gets difficult, talk to the lender early: payment holidays, a longer term or a period of interest only are easier to agree before a payment is missed.

Where Business Loan Advice fits

We are not a lender or a broker 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 premises a company trades from. 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 loans to individuals or pension schemes, or property with a residential part. 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 its premises, 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 an owner-occupied commercial mortgage?

It is a loan, secured on the property, that a business uses to buy premises it will trade from. The lender expects repayments to come from the business’s profits rather than rent from a tenant, and assesses the business’s accounts and cash flow as well as the building.

How much deposit do I need to buy business premises?

Usually 25% to 40% of the price, because most lenders lend 60% to 75% of the value. Add stamp duty, valuation, legal and lender fees. On our £560,000 example with a 70% loan, the total cash needed was about £206,400, or 37% of the price.

Is it better to rent or buy business premises?

It depends on what the deposit would otherwise earn, how long you will stay and what happens to the value. In our ten-year example, buying beat renting by about £42,600 after tax if the value held, but renting won if the value fell more than about 8% or if the cash could earn much more in the business.

How do lenders work out how much I can borrow?

They apply two tests and use the lower result. The loan must be within their maximum loan to value, often 70% to 75%. And the business’s earnings, with the rent you will stop paying added back, must cover all loan payments by about 125% to 150%.

What are owner-occupied commercial mortgage rates in 2026?

Mainstream five-year fixes are commonly about 6% to 9%. As one published example, Allica Bank showed 6.50% up to 65% loan to value and 6.85% above it on 5 November 2026, including a discount for using its current account. Your rate depends on the business, the building and the loan to value.

Can a new business get a commercial mortgage to buy premises?

It is harder. Most lenders want two or three years of accounts. Some lend to newer businesses with a larger deposit, strong management experience or extra security, and some apply a tougher cover test to first-time buyers of premises, such as 150% rather than 130%.

Should my company or I personally buy the premises?

There is no single answer. A company purchase is simpler and keeps repayments inside the business. Owning it personally or through a pension scheme can keep it away from trading creditors, but brings different tax treatment and lending rules. Take advice from an accountant before you make an offer.

Can my pension buy my business premises?

A SSAS or SIPP can buy commercial property and let it to your company at a market rent. The scheme can borrow up to 50% of its net value immediately before the borrowing, and connected-party deals must be on commercial terms. Residential property, such as a flat above the premises, brings heavy tax charges inside a pension.

Is VAT charged when buying commercial property?

Only if the seller has opted to tax the building. Then 20% VAT is added and stamp duty is charged on the VAT-inclusive price. A fully VAT-registered business can usually reclaim it, but must fund it first. A business making exempt supplies may not be able to reclaim it.

Is commercial mortgage interest tax deductible?

For a company, interest on a loan used for its business is normally deductible for Corporation Tax, but capital repayments are not. Stamp duty and legal costs on the purchase are added to the cost of the building rather than deducted. Ask your accountant how this applies to you.

Can I let out part of the building I buy?

Often, yes. Many lenders still treat the loan as owner-occupied if the business occupies the main part, though the share they require varies. Tell the lender at the start, as the let part may be assessed like an investment.

How long does it take to buy commercial premises with a mortgage?

Commonly 8 to 16 weeks from first approach to completion, longer for large, complex or trading buildings. Valuation and legal work take most of the time. A bridging loan can be faster but costs more.

Will I need a personal guarantee?

Often. Many lenders ask directors to guarantee part or all of a company’s commercial mortgage, especially for smaller or younger businesses. Some set a minimum: Yorkshire Building Society’s owner-occupier criteria ask for at least £175,000 or 10% of the loan.

Is an owner-occupied commercial mortgage regulated?

A commercial mortgage to a limited company is generally not regulated by the FCA. It can be regulated when the borrower is an individual or trustees and at least 40% of the property is used as their home or a close relative’s.

Sources, checked 5 November 2026

Allica Bank: commercial mortgage rates, checked 5 November 2026

Allica Bank: commercial mortgages product guide for intermediaries, 24 September 2026

Yorkshire Building Society Commercial: owner-occupier criteria

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