Commercial mortgages are available to businesses, property investors and individuals who want to purchase or refinance property used for business purposes or commercial investment.
Unlike residential mortgages, commercial property finance is typically assessed on a case-by-case basis. Lenders review the borrower’s financial position, the type of property being financed and the income supporting the loan before deciding whether to offer funding.
Because of this, commercial mortgages can be available to a wide range of borrowers, provided the transaction meets the lender’s criteria.
Business Owners Buying Premises
Many commercial mortgages are arranged by business owners who want to purchase the premises their business operates from.
Examples may include:
- Offices for professional services firms
- Retail units for shops or restaurants
- Industrial premises or warehouses
- Workshops or specialist business facilities
In these cases, lenders usually assess the financial performance of the business and its ability to support the mortgage repayments.
Property Investors
Commercial mortgages are also commonly used by property investors purchasing buildings that generate rental income.
These properties might include:
- Office buildings
- Retail units and shopping parades
- Industrial units and warehouses
- Mixed-use or semi-commercial properties
Lenders will typically consider the strength of the rental income and the stability of the tenants when assessing these applications.
Limited Companies and SPVs
Many commercial mortgages are arranged through limited companies or special purpose vehicles (SPVs).
This structure is often used by property investors who hold commercial property within a company rather than in their personal name.
Lenders will normally review the company structure and the experience of the directors when assessing the application.
Experienced Property Investors
Borrowers who already own commercial or investment property may find it easier to obtain commercial mortgage finance.
Lenders often consider the borrower’s experience managing property portfolios when assessing risk.
However, first-time commercial property buyers may still be able to obtain funding if the overall transaction is considered suitable.
What Lenders Typically Look For
Commercial mortgage lenders usually review several factors when deciding whether to offer funding.
These may include:
- The borrower’s financial position
- The deposit and loan-to-value ratio
- The type and location of the property
- The income generated by the property
- The borrower’s experience with property or business ownership
Because each lender has its own criteria, the availability of funding can vary depending on the transaction.
Why Borrowers Often Use Commercial Mortgage Brokers
Commercial lending criteria can vary significantly between lenders, and many lenders operate primarily through intermediaries.
Commercial mortgage brokers can help borrowers identify lenders suited to their circumstances and structure the application appropriately.
This can make it easier to navigate the commercial property finance market.
Related Guides
- What do commercial mortgage brokers do
- What are the benefits of a commercial mortgage broker
- Understanding commercial mortgage brokers
Need Help Arranging Commercial Property Finance?
Commercial mortgage options can vary widely depending on the property type, borrower profile and lender criteria.
Explore our Best Commercial Mortgage Brokers in the UK guide to compare experienced advisers who specialise in arranging commercial property finance.
