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Commercial Property

Secure a loan that suits your investment needs and purchase or refinance a lucrative commercial property.

Getting started with commercial investment mortgages

Commercial investment mortgages are for anyone wanting to own and rent commercial or semi-commercial properties. This type of commercial finance is the most like traditional buy to let mortgage finance and works in a similar way as the rental income is the primary consideration for lenders assessing your application. 

As a commercial investor, you’ll benefit from a regular rental income from the trading tenants and any increases in the property’s value (capital gains).

To ensure you get expert advice and the most suitable commercial finance for your investment plans, speak to our specialist team of commercial mortgage brokers. 

Everything You Need to Know About Commercial Investment Mortgages

Who can get a commercial investment mortgage?

You can apply for commercial investment mortgages in your own name, as Limited or Trading Limited Company, a partnership (LLP or Limited Company), or as a trust. 

What experience do I need to get a commercial investment mortgage?

Most commercial lenders prefer that you have previous letting experience in the residential buy to let sector when applying for your first commercial investment mortgage. However, with the proper business case, some will consider first-time landlords. Speak to one of our experts to find out if you’ll be eligible.

How are commercial investment mortgage applications assessed?

Lenders will mainly focus on the applicant, the property, and the lease to assess the viability of your commercial mortgage applications. Each lender will have a unique set of criteria borrowers need to meet, which is why using a commercial broker can be beneficial.

The lender must be confident that the property you’re mortgaging has strong letting demand and is, therefore, likely to have short void periods. Lenders will also want to know if the property will have resale demand if they need to repossess. The valuer's report will provide the necessary information to determine these factors during the application process.

Commercial mortgage lenders also look at the lease terms and tenants. They’ll want a lease with at least a few years remaining; high street banks usually require ten years, while challenger banks may accept less. It’s also important that your tenant is financially sound and in a stable business sector.

How much can you borrow for commercial investment mortgages?

Minimum and maximum lending limits will vary by lender, but as a guide, most will consider loans between £50,000 and £25 million for five to 25-year terms. Of course, other factors determine how much you can borrow, including loan to value and rental income.

Loan to value (LTV)

Typically, the maximum LTV for commercial investment mortgages is 75%, meaning you’ll need a deposit of 25% of the property’s total value. However, lenders will have different LTV limits for different commercial property types and applicants with adverse credit.

As with any mortgage, the more equity (or deposit) you’ve invested, the better mortgage interest rates you’ll be able to access.

Rental income

Like residential buy to let mortgages, the rental income generated by the property is a primary consideration for a commercial investment mortgage application. The property must earn enough rent to pass affordability calculations, usually 125% -140% of the monthly mortgage repayment.

How much are commercial mortgage rates?

As with any mortgage interest rates, commercial rates change regularly depending on the broader economic landscape. Lenders will also price differently depending on property type, business sector and loan to value.

High street banks are typically slightly cheaper; however, they have much stricter criteria and are unlikely to accept less traditional or riskier investments. High street banks are also more likely to lend on capital and interest repayments, meaning your monthly mortgage costs will be higher. 

While usually slightly more expensive, Challenger banks can consider more specialist requirements and are comfortable offering interest-only terms, which is an excellent way to boost your cashflow.

Frequently asked commercial investment questions…

How long do commercial investment mortgages take to complete?

It depends on the complexity of your case, but we’d expect a commercial investment mortgage to complete within six to 12 weeks from the point of application.

Variable or fixed-rate mortgages

Commercial lenders offer both variable and fixed-rate mortgage options. Unlike other sectors, many commercial investors have traditionally preferred variable and tracker rate products, which are often cheaper than their fixed counterparts. However, fixed rates are becoming more popular as they offer greater financial security. Which you choose is a personal decision, and something we recommend discussing with your broker.

What documents will I need for a commercial investment mortgage application?

When you apply for a commercial mortgage, most lenders will need:

  • 3 to 6 months of personal bank statements
  • Assets, liability, income and expenditure (ALIE) summary
  • Copy of the tenant lease(s) and details of the tenant's business
  • Rental income (actual or projected)
  • Record of your background property portfolio

Why should I use a commercial mortgage broker?

While many commercial lenders will accept applications directly from borrowers, some will not. By using MFB, you’ll gain access to more commercial investment finance options, unrivalled experience and knowledge, meaning you’ll definitely get the best deal for your circumstances. Furthermore, unlike other mortgage sectors, some lenders will tailor rates to specific cases. By using an experienced broker, they may be able to negotiate a better rate that you wouldn’t have otherwise been able to access. Lastly, you’ll get specialist advice on your property finances, which may open up options you’d not considered, which will boost your income. We’ll also support your application right through to completion, as you'll get a dedicated relationship manager and Broker, saving you time and stress.

Talk to an expert

We handle all types of commercial mortgages, from commercial investment and owner-occupier to semi-commercial. Our experts are eager to help with your future aspirations. Just get in touch through our channels.

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