Commercial Mortgages UK – Get The Best Deal & Fast Approval

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Commercial mortgages allow you to purchase or refinance commercial property that is to be owner occupied or used for investment purposes.

They’re a specialist form of commercial finance with an in depth application process.

In this guide we break down a lot of information in a short time to give you a detailed picture of the current market and what you can expect should you apply.

For free, personalised advice, enquire now and we’ll be happy to help.

Understanding commercial mortgages

The first step to getting business mortgages is to understand what this financial product is and how they work.

What is a commercial mortgage?

A commercial mortgage is a type of property finance that is used to purchase or refinance commercial properties.

Commercial mortgages can be secured against almost any property that is used for business purposes including offices, industrial buildings, warehouses, retail units and leisure properties.

How do they work?

They are a form of long-term financing that is repaid over anything up to 25 years.

They work much like a traditional residential mortgage, with the main differences being that security is taken over a commercial property and how applications are underwritten.

While residential mortgage underwriting tends to be simple, commercial mortgage underwriting is based on the following:

  • The security property – location, property type and local demand
  • Your business’s financial position (for owner-occupied lending, or,
  • Rental income, lease length and tenant profile (for commercial investment mortgages)
  • The borrower’s credit history (personal and business taken into account)
  • Experience – for some transactions, experience may be a key factor

How much will it cost?

The main cost of a commercial mortgage is the interest charged. That said, there are also set-up costs to consider and your monthly costs will be impacted by your repayment type.

Here’s a breakdown of the key costs:

What interest rate will I pay?

Commercial mortgage rates start at 5.5% and can go up to 10% for higher risk applications.

The interest rate charged will depend on several factors including, whether you will occupy or let the property, the property type, your credit history and business financials.

Other factors that can impact the commercial mortgage rates that you pay are:

  • Deposit level
  • Geographical location
  • Loan to value
  • Borrower experience and outside net worth
  • Whether the interest rate is fixed or variable
  • Risk level
  • Business stability of the borrower
  • Lender chosen

It’s not possible to quote figures for every scenario in this text as there are so many variables, but for more detail on rates, read our guide to the best commercial mortgage rates and fees or try our commercial mortgage calculator for an idea of your costs.

Alternatively, to get an accurate, no obligation quote based on your personal circumstances, enquire online or call us on 01922 620008.

Should I choose a fixed or variable rate product?

When applying, you can choose to take either a fixed or variable rate mortgage. You should choose between a fixed or variable rate product depending on your risk profile.

Choosing either product comes down to whether you prefer the opportunity to benefit from interest rate cuts or prefer to avoid the risk of interest rate rises.

Fixed rate products offer stability of your monthly payments as the payment will not go up or down during the fixed rate period. Fixed rate products have a set fixed period, which is usually between 2 to 5 years, before reverting to a variable rate at the end of the fixed period.

Variable rate products see your payments move up or down depending on movement in either your lender’s standard variable rate or the Bank of England Base Rate.

What are the set-up costs for a commercial property loan?

The set-up costs for a commercial mortgage are:

  • Lender arrangement fee – Arrangement fees are often charged as a percentage of the loan. Lender arrangement fees range from 1-2% but are usually between 1.5-2%. It is usually possible to add the fee to the loan.
  • Broker fees – Most brokers will charge broker fees for their service. This is often upwards of 1% of the loan amount. We don’t usually charge a broker fee for loans over £100,000.
  • Valuation fees – As with a residential mortgage, a valuer will inspect the property and produce a report for the lender. The fee is usually paid partway through the process. This is before the offer, and the cost will vary based on the type, value and location of the property.
  • Legal fees – Most providers will expect you to cover both your own and their legal fees concerning the loan. The cost of legal work is higher than that associated with residential mortgages. The costs charged will vary depending on the loan size, property value and complexity of the transaction. Legal fees are usually quoted on a case-by-case basis.

Key criteria points

How much can I borrow?

We offer commercial mortgages from £50,000 with no maximum loan size.

What is the maximum loan to value?

The maximum loan to value (LTV) for a commercial mortgage is 80% for owner-occupied applications and 75% for commercial investment mortgages.

The maximum loan to value will depend on the security property, credit history, the financials of the transaction (how profitable it is and how robust the income is) and the property location.

For some sectors, such as the medical profession, it is possible to fund up to 100% LTV.

How much deposit do I need?

When looking to purchase a commercial property, you’ll need a deposit of 20-40% of the purchase price.

The exact deposit will depend on whether the application is owner-occupied or commercial investment, with a minimum 25% deposit required for commercial investment applications.

Commercial mortgages for start-ups require a deposit of at least 50%.

Who can get one?

We can offer property finance to:

  • Individuals
  • Sole traders
  • Partnerships
  • LLPs
  • Ltd companies
  • SIPPs
  • Overseas applicants including expats or overseas investors

You’ll qualify if:

  • You’re a trading business looking to buy or refinance premises.
  • You’re a property investor purchasing commercial property.
  • You can provide accounts or lease details, and can demonstrate affordability and maintain a good credit history.
  • You have sufficient deposit — typically 25–40% depending on LTV and sector.

Funding can be offered to most applicants, whether you’re a property investor or business owner.

How to apply for a commercial mortgage

Understanding the best ways to apply, the application process and how to prepare an application are key.

What is the best way to apply?

The best way to apply is to use an experienced and fee-free commercial mortgage broker.

Fee free brokers offer you significant advantages without adding any cost to your transaction. In fact, a good broker is likely to save you a lot of money.

The benefits go beyond just ‘saving you time’ by filling in paperwork and doing menial tasks. There are real, and big benefits to using a broker. They include:

  • Access a wider market – Brokers have access to lenders that don’t work directly with the public (or with most brokers, instead operating through small, hand selected panels). We understand the benefits of this approach first hand, as we’re on all of the select panels.
  • Guidance throughout the process – Not just on choosing the best lender. Is there a better structure to purchasing a property? could there be tax savings? Asked a difficult question by the lender and unsure how to answer it? Is solicitor suitable for commercial transactions? Which valuer should I choose? We have the answers to all these questions and more. Each one of these can be extremely costly if there’s a misstep.
  • Presenting applications – Commercial mortgage applications and individually underwritten without an algorithm in sight. This means that how you present your application matters greatly. A good broker makes it easy for a lender to say yes. In many cases, the narrative can be as important as facts.
  • Getting a better deal – Our wider market access and deep knowledge of rates and criteria mean that we can often secure a better deal than clients could realistically secure themselves.
  • Experience – Experienced brokers can demystify the process, structure complex transactions and leverage strong relationships to make sure you get the best possible outcome.
  • Lender selection – Each lender has their own specialisms, sector by sector criteria tweaks, location preferences and ideal borrower profile. We fit the right applications to the right lenders to make the process much simpler.
  • Dealing with things that go wrong – Sometimes, things go wrong. When that happens, an experienced broker can appeal decisions, leverage relationships and present strong arguments to turn things around. We also know when to pivot and change our approach.
  • Assisting with applications – Knowing what to send, when and what to prepare for the next step and old-fashioned chasing. We get our hands dirty and put in the hard work to keep your application moving.

Why choose ABC Finance as your commercial mortgage broker?

At ABC Finance, we’re a multi-award winning, fee-free commercial mortgage broker.

We were established in the year 2000 and have deep relationships and access to the key lenders across the market.

Get in touch now and we’ll give you a written quote and approval in principle within 1 hour, make the process of applying simple and handle the whole process for you.

Enquire online or call us on 01922 620008 to get started.

What is the application process?

The application process works as follows:

  1. Enquire now for an initial discussion. We look to understand the transaction, your needs and background.
  2. We issue a written approval in principle and quote within 1 hour. You’ll also receive a clear outline of the information and documents required to progress your application.
  3. If you’re happy with your offer, send us the required documents and either complete and send the forms or complete your forms over a call with your dedicated advisor.
  4. We put together the application with a detailed report on the strengths of the application and formally submit it to the lender.
  5. The application is reviewed and an offer issued. A property valuation is then undertaken. Once returned, the lender will formally sign off on your application.
  6. Legal work is undertaken between your solicitor, the lender’s solicitor (and the seller’s solicitor for a purchase). Once this is done, completion can take place.

The full process usually takes 8-12 weeks and can be sped up by careful presentation of the application, lender choice and preparation of your documents before application.

What documents will be required for this type of commercial finance?

The documents needed to apply for a commercial mortgage are:

  • A fully completed application form
  • Property details including type, address, condition and planned use
  • A detailed assets and liability summary
  • 2 years trading accounts (for owner-occupied applications)
  • 3-6 months statements for your business bank accounts (for owner-occupied applications)
  • A copy of leases and tenancy agreements (for commercial buy to let applications)

Depending on the application, your personal business and financial history and your deposit level, more information may be required.

What are the different types of commercial property mortgage?

There are several types, including:

Practical information on getting a commercial mortgage

As the whole market is bespoke, trying to explain it can lead to generic advice that doesn’t really cover what you need to know. Here is some short, practical advice:

What are the advantages and disadvantages of buying a commercial property?

The advantages are:

  • Capital appreciation – Your property could increase in value over the long term.
  • Tax deductible interest – The interest costs on commercial finance are tax deductible.
  • Outgoings are inflation proof – While rents go up each year, commercial mortgage costs remain the same, especially if your product is a fixed rate.
  • Potential to let – If you no longer require the use of the property, it could be let to produce rental income.
  • You control the asset – When renting a property, the landlord retains a level of control. This is not the case when you own the asset.

The disadvantages to consider are:

  • High upfront costs – The upfront cost of buying is higher than the cost of renting.
  • Maintenance – You are responsible for maintenance and insurance, although this is also true on some leases.
  • Credit impact – If you miss rent payments, you lose the property. If you miss mortgage payments, you will be repossessed and your credit history will also suffer a significant impact.

What are the alternatives to business property finance?

The alternatives to a commercial mortgage are:

  • Bridging loans – Bridging loans can be used to purchase or refinance a property faster than would be possible using a commercial mortgage, albeit at a higher interest rate.
  • Residential mortgages – When buying a new home that you will run a business from, a residential mortgage may allow you to raise the funds at a lower interest rate than would be available using a commercial mortgage.
  • Secured business loans – When looking to raise money for your business by securing a loan against your business premises, a secured business loan is a strong option. They can usually be arranged quicker than a commercial mortgage and could allow you to borrow up to 70% of your business property value.

What if I have no experience?

As a first time commercial property investor, you can still qualify for this type of finance, but your choice of lender may be limited.

As a business owner, a strong track record in your business will negate any issues in most cases.

For investors, purchasing a property with a strong tenant already in place will increase your chances of approval.

How quickly can I complete and how much money will I need to put down?

You can complete in around 8 weeks and will need a deposit of at least 20%.

On top of that, allow for commercial stamp duty, valuation and legal costs.

How do I get started?

To get started, enquire online or call us on 01922 620008.

We will give you an approval in principle and a written quote within 1 hour. If you’re not quite ready to proceed, we can help you prepare your application, including offering guidance on ensuring financial documents are up to date, whether forecasts will be required, a business plan and any other supporting documents.