Owner-occupied or investment property?
An owner-occupied mortgage supports premises used by the business. A commercial investment mortgage is used for property let to business tenants. Lenders consider the trading business, rental income or both, depending on the proposal.
Mixed-use buildings, unusual property types and short leases can change the available options. Explain the current use and any planned refurbishment or change of use. A commercial property loan should not be confused with a residential mortgage or a business overdraft.
Deposit and loan-to-value
If a lender advanced an assumed 65% against a £400,000 property, the mortgage would be £260,000 and the purchase-price deposit £140,000. That excludes tax, valuation, legal work and other costs. The example is not an available loan-to-value offer.
The lender’s valuation can differ from the purchase price. Existing charges, tenancy terms and property condition also matter. Having the deposit does not remove the need to show sustainable debt service and enough working cash after completion.
Capital repayment, interest-only and refinancing
A capital-and-interest schedule reduces the outstanding principal over time. Interest-only payments leave principal to repay at the end. A lower monthly payment can therefore carry a substantial refinancing or sale requirement later.
Ask how a fixed rate ends, whether the rate can change and what early repayment charges apply. Stress higher payments at refinancing and a lower property valuation. An assumed sale is not a reliable exit if the business depends on continuing to occupy the premises.
Budget for the purchase, not only the mortgage
Costs can include arrangement, valuation and legal fees, surveys, insurance and applicable property transaction taxes. The tax system differs between England and Northern Ireland, Wales and Scotland; obtain advice for the actual property rather than applying one UK-wide tax assumption.
Consider ongoing repairs, service charges and any void periods as well as finance costs. For investment property, rent received is not the same as net cash available for the mortgage. Include management costs, maintenance and delays in reletting.
Documents and specialist assessment
Prepare the property details, ownership structure, accounts, bank statements, deposit source and a forecast. For let property, the lender may need leases, tenant information and rental evidence. Legal and valuation work can affect completion timing.
Shareholder’s general finance referral is not a specialist mortgage offer or a guarantee of availability. Compare specialist advice and lender terms, particularly where a property is mixed-use or residential elements raise regulatory questions.
A few things worth knowing
Common questions
How much deposit do I need?
There is no single market-wide deposit. It depends on the property, valuation, borrower, purpose and lender. The example on this page is illustrative, not an available product.
Is a commercial mortgage a bridging loan?
No. A bridging loan is normally short-term funding with a defined exit, whereas a commercial mortgage generally supports longer-term property finance.
Can a business use an interest-only mortgage?
Some arrangements may allow it, but eligibility and terms vary. The principal still needs to be repaid or refinanced at the agreed end date.