PROPERTY FINANCE - commercial mortgage

Your guide to commercial mortgages

Everything your limited company needs to know about commercial mortgages, who they’re for and how to apply.

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What is a commercial mortgage? 

A commercial mortgage, often referred to as a business mortgage, is designed to support business owners looking to secure property or land for commercial use. 

It’s effectively a loan, typically over £25,000, which is secured against a property being offered as security. With a range of competitive commercial mortgage rates currently available in the UK, more and more businesses are using this option to aid growth. 

This mortgage can be used for: 

  • Buying business premises
  • Refinance of currently owned property
  • Property development
  • Investment finance
  • Refurbishing existing properties
  • Buying equipment, vehicles and other machinery 

Commercial mortgage calculator

Use our commercial mortgage calculator to see what your monthly repayments are likely to look like, as well as the total cost of the loan including interest. Just let us know how much you'd like to borrow, how long you'd like the repayments to be over and preferred interest rates. If something looks like a good match, you can get started with your application right away!

What do you need the funding for?

Mortgages, development and bridging loans for commercial or buy to let properties

For how long do you want to pay back your loan?

£ 500,000

Interest rate

Typical business loans to cover costs range from 7% - 16% APR depending on the duration, amount and lender.

Loan breakdown

Loan amount

£ -

Total interest amount

£ - 7% APR over a 10 years

Total repayable

£ -

Total monthly repayment

£ - / month

When would my business need a commercial mortgage?

Commercial mortgages can be used in a variety of different ways to benefit your business and put business plans in action. They are often used when a typical business loan has finished, yet an owner requires some additional financial support in relation to their premises or equipment. 

Here is a list of examples of reasons your business could consider using a commercial mortgage loan:

  • Buying or developing property 
  • Expanding or refurbishing existing property 
  • Acquiring an existing business 
  • Releasing capital to invest in your business 
  • Buying vehicles, machinery or equipment 
  • Investing in property to lease to another business

A commercial mortgage is a medium to long-term loan spanning between three to 25 years. Most lenders require a deposit between 25% to 50%. 

You can explore different commercial mortgage lenders below. Or reach out and chat to our funding specialists to learn more.

What are the benefits of a commercial mortgage?

There are some advantages to using a commercial mortgage loan and helping your business release working capital to fuel growth.

  • Commercial mortgages can help to businesses buy premises and move away from property rental 
  • Refinancing your premises with a mortgage can help to inject capital into your business and release cash 
  • Commercial mortgages tend to have lower interest rates than other business loans 
  • The interest on the mortgages is tax-deductible which means it can help your business reduce yearly tax costs 

At Capitalise, we work with a wide range of commercial mortgage lenders to offer you solutions that best suit your business needs. We’ll look at your financials, your business plans and help tailor financial options that work for you. 

Why Use A Commercial Mortgage?

Take advantage of a property purchase opportunity without tying up working capital.

Reduce your monthly bills

For many businesses currently renting their premises, the spiralling costs of property rental is now becoming a key driver behind making a full purchase.

With Capitalise, you can access a range of competitive commercial mortgage rates which can help to drive down the amount your business spends each month on its premises, whilst gradually working towards full ownership.

Raise capital for your business

If you need to inject capital into your business and already own your premises, then you may wish to consider refinancing as a means to release additional cash. This can often work out more cost effective than taking on a new business loan and will save you from having to sell parts of your business to outside investors.

Industry-specific lenders

Once you've completed your Capitalise profile, we'll be able to quickly match your business with commercial property mortgage lenders who have a proven track record lending to your sector.

They'll be able to offer insights based on their previous experiences working with companies like yours, helping you to choose an option that best fits your business.

Terms that suit your business

Our lenders understand that the financial and business circumstances surrounding each commercial property purchase is different, which is why our partners tailor their options to fit in with each individual applicant.

With short, mid and long-term lending options available, you'll be able to secure a great deal on your mortgage with affordable repayments structured around your projected cash flow.

What are the key features of a commercial mortgage?

Commercial mortgages differ from the regular mortgages or business loans that you may be more familiar with. 

Commercial mortgages tend to offer better interest rates than a regular unsecured business loan as the property itself provides security against the loan. However, they tend to have higher interest rates than a regular home mortgage as these are generally seen as higher-risk loans to lenders. 

It’s important to note that when you take a commercial mortgage there are a number of fees you may have to pay on top. Including an arrangement fee and valuation fee. If you’d like to learn more about your options or how much a commercial mortgage is likely to cost your business, you can connect with a member of our team when signing up

Who should apply for a commercial mortgage?

If you’re a business owner looking to either release equity or cash from an existing business premise or looking to expand your premises, a commercial mortgage could be a good solution. Similarly, if you’re a business looking to acquire a buy-to-let property. 

These mortgages can help to finance business or expansion plans as well as reduce monthly overheads. 

How does a commercial mortgage work?

  1. Commercial mortgages can be used to both purchase a business property or to raise capital by refinancing a premises that you already own.
  2. They are taken out over a pre-determined number of years with any charges, interest rates and fees transparently outlined upfront so you'll be able to budget effectively.
  3. Most come with a variable interest rate, however fixed interest rates are available from certain specialist providers.
  4. Once your Capitalise profile has been created, you'll be able to apply to multiple lenders simultaneously as well as receiving decision letters online, enabling you to compare fully underwritten options before committing to the one which best suits your business.

How can I get a commercial mortgage?

In order to get approved for a commercial mortgage, you’ll have to prove that you meet financial requirements including:

  • Business credit check to see how you existing debt and payments 
  • Business profitability and performance history 
  • Two to three months of business bank account statements 
  • Proof of identity and address
  • Any lease or tenancy agreements 

The application and requirement will depend on the specific lender. 

At Capitalise, we aim to make this process easier. Once your Capitalise profile has been created, you'll be able to apply to multiple lenders simultaneously as well as receiving decision letters online, enabling you to compare fully underwritten options before committing to the one which best suits your business.

Commercial mortgage frequently asked questions

There are a few key differentiators between commercial mortgages and personal mortgages, the obvious being that commercial mortgages are for business purposes, and personal mortgages are for the buyer to live in. 

The key differences you’ll need to know as a potential buyer are: 

  • The loan to value ratio (LTV) is much higher for commercial properties. While it’s possible to get residential mortgages with as little as 5% deposits, commercial mortgages will require at least 25-35% deposits. 
  • As commercial mortgages are seen as riskier to the lender, they will also come with higher interest rates - however commercial mortgages usually have much lower rates than alternative business loans. 

The minimum deposit you will need for a commercial mortgage is 25% of the property value, although this can be up to 40%. The level of risk of the business and the amount of security provided will all impact how much deposit you may need to put down.  

The nature of the property will also impact how much of a deposit you will need. Owner occupied properties tend to require 20-30% deposits. While commercial investment mortgages are likely to require at least 25%. 

The short answer is yes - but you will likely be subject to higher interest rates. A lower credit score will be perceived by the lender as   taking on higher risk. 
If you have any adverse credit history, you should provide the lender with as much detail as possible.If you can offer an explanation, the lender may be more flexible. 
Check your credit profile and improve your business credit score before applying to access the best rates. 

Yes - a commercial mortgage is a type of secured loan, meaning the loan is secured against an asset, normally a home. So if you default on your mortgage,the lender could take your property as payment.
It’s worth bearing in mind that the lender will try and put a payment plan in place first - repossessing the property is the last option, but it is a risk you should be aware of. 

Yes! Most new businesses can get a commercial mortgage, however as lenders use trading history as judgement for affordability, you will be viewed as high risk, so you will typically need a larger deposit - typically around 50% of the purchase price. 
To maximise your chances of getting a commercial mortgage as a new business, ensure you have an air tight business plan and projections for profitability, and check your business credit profile for no adverse credit history.

Yes, you can get a commercial mortgage in a limited company. Choosing to get a commercial mortgage through a limited company can even come with tax benefits, as corporation tax can be more favourable than income tax. 

A lender will assess the affordability of the mortgage based on the strength of the applicant’s business, so it’s worth bearing in mind that the business should be able to show clear affordability for the monthly mortgage repayments. 

No, it’s not necessary to set up a limited company to get a commercial mortgage and many sole traders choose to explore this type of loan. If you do not have a limited company, private landlords with a commercial mortgage do not benefit from the same allowances and can only claim the basic rate tax credit against their mortgage interest. It will be worth consulting your accountant to see the most tax efficient method for your specific needs.