Commercial Property
Investment

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.