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What is a commercial property mortgage?

A commercial property mortgage is a type of loan that helps you buy or refinance a property that you intend to use for business purposes. Properties that you would need a commercial mortgage for include warehouses, shops or retail units and office spaces. 

This type of mortgage is typically offered by banks, credit unions, and specialist lenders and can be used to finance or refinance your commercial property. Commercial mortgages differ to residential ones in that they are very bespoke and are not regulated. Due to their bespoke nature, commercial property mortgage rates are frequently negotiated between the lender and your mortgage broker. These types of mortgages are wholly for those intending to use the whole property for business usage. If you need a mortgage for a mixed-use property, learn more about our semi-commercial mortgages.

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The key features & benefits of a commercial property mortgage

Thinking of getting a commercial property mortgage? Here are some key features and benefits to keep in mind:

  • Repayment terms are flexible. Commercial property mortgages typically offer flexible repayment terms, which can range from 5 to 30 years.
  • Interest rates can be competitive. Commercial mortgage interest rates tend to be higher than those on residential mortgages. Despite this, they tend to be lower compared to other types of commercial finance.
  • You can borrow more. Commercial property mortgages allow you to finance high-value properties, perfect for investors.
  • Choose from fixed or variable interest rates. Commercial property mortgage products normally offer the option of fixed or variable rates so you can choose what is right for your business based on your business plan and financial situation.
  • You can diversify your income. A commercial property mortgage allows you to buy a commercial property that you can rent out. Besides, if property prices increase you can enjoy capital appreciation.

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Commercial property mortgage eligibility explained

To get a commercial mortgage, you’ll need to meet lending criteria but this can vary depending on your lender. Here are some general eligibility requirements:

  • Good credit score. Most lenders will want to see that you have a good credit score and history. Specialist lenders could be available for those who don’t.
  • Proof of income. You’ll need to prove your income by providing documents such as tax returns, bank statements, and financial statements.
  • Commercial leases. The lender will want to see the commercial leases you have in place with the tenants. As a guide, commercial leases need to be at least three years in length and new leases can be drafted during the mortgage process. Generally lenders do not like break clauses which would allow the tenant to stop renting the property at short notice. 
  • Good-sized deposit. You’ll typically need to put down a deposit of at least 20% to 40% of the property’s value. But, if your deposit is lower or you have no deposit, speak to our advisors as other options may be available. See our FAQ on deposits below for more information.
  • Business plan. Lenders will almost certainly ask to see a copy of your business plan outlining your goals and projections for the business.
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Commercial Mortgage For investment property

Do you want to purchase a property to rent out? If the tenants will be one or more businesses then a commercial investment mortgage (also known as Buy To Let commercial property mortgage) will allow you to do this. This type of mortgage is not suitable if the property has any element of residential usage so you won’t be able to let it out for people to live in (you’ll need a residential buy to let or semi-commercial mortgage instead).  It’s worth noting that commercial mortgages do have higher interest rates, but usually command a higher rental income to compensate. It is also common practice for tenants to be responsible for the maintenance and upkeep of the property. 

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Why choose Simple Fast Mortgage to help you secure a mortgage for your commercial property?

Simple Fast Mortgage has a team of experienced mortgage advisors who can help you find the best mortgage for your needs. We work with a wide range of lenders who offer commercial property mortgages to business owners and investors. Our team will guide you through the mortgage process helping you find a mortgage with competitive rates, flexible terms, and low fees.

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