Commercial Mortgages
Commercial Buy-to-Let Mortgages: Letting Property to Businesses
A commercial investment mortgage funds property you let to businesses, such as shops, offices and industrial units. Lenders care most about the lease and the tenant: how long the rent is secured and how reliable the tenant is.
Written and reviewed by Davi Thakar, CeMAP qualified mortgage and protection adviser Updated
A commercial buy-to-let mortgage, usually called a commercial investment mortgage, funds a property you let to a business, such as a shop, office, warehouse or industrial unit. Lenders care most about the lease and the tenant, because that is where the money to repay the loan comes from.
Residential buy-to-let is about rent and the property. Commercial is about who the tenant is and how long they are tied in. Two units with the same rent can get very different loans depending on the lease.
This guide covers what lenders check, how commercial property is valued, deposits, tax and VAT. For the bigger picture, see our commercial mortgage guide.
Can you get a buy-to-let mortgage on commercial property?
Yes, from commercial lenders. Expect a 30% to 40% deposit and for the rent to cover the loan payments by 125% to 150% or more. A long lease to a strong tenant gets the best terms. An empty unit or a lease about to end means fewer lenders and a bigger deposit, and may need bridging until a tenant is in.
What do lenders look at?
| Factor | Why it matters |
|---|---|
| Lease length | Years left before the lease ends or a break clause. Longer is better |
| Tenant strength | A national business is a stronger covenant than a new local one |
| Rent and cover | Rent must cover the loan payments comfortably, often by 125% to 150% or more |
| Repairs | Whether the tenant pays for repairs and insurance under a full repairing lease |
| Location and use | How easy the property would be to re-let if the tenant left |
| Deposit | Usually 30% to 40% |
Which situations do lenders see most?
These are illustrative situations, not Option Finance client outcomes.
Long lease, strong tenant
A national tenant with ten years left. Lenders compete for this, and terms are best.
The easiest case to financeLocal tenant, short lease
A small business with two years left. Lenders worry about re-letting, so the loan is smaller.
Expect a bigger depositEmpty unit
No tenant yet. Most term lenders will wait until a lease is signed.
Bridging, then refinance once letMulti-let estate
Several tenants on different leases. Lenders look at the spread and the weakest leases.
A schedule of tenancies is keyHow is commercial property valued?
Commercial investments are usually valued on their yield: the rent as a share of the value. A unit let at £24,000 a year to a strong tenant on a long lease might be valued at a 7% yield, about £343,000. The same rent on a short lease to a weaker tenant might be valued at 9%, about £267,000. The lease alone moved the value by over £75,000.
Illustration only
An investor buys a shop let at £24,000 a year with eight years left on the lease, for £320,000. A lender offers 65%, £208,000, over 20 years at 7%. Payments are about £19,350 a year, so the rent covers them about 1.24 times. A lender wanting 1.25 cover might trim the loan slightly or ask for a bigger deposit.
What tax and VAT do you need to think about?
- Stamp Duty on commercial property uses non-residential rates in England and Northern Ireland: 0% up to £150,000, 2% to £250,000 and 5% above. On £320,000 that is about £5,500. See GOV.UK’s non-residential rates.
- VAT: if the seller has opted to tax the building, VAT may be charged on the price unless the sale qualifies as a transfer of a going concern. HMRC explains the option in VAT Notice 742A. Take advice early, because VAT can change how much cash you need.
- Income tax: rental profit is taxed personally or in a company. Personal property income tax rates rise from April 2027.
What if the property has flats too?
If the building mixes commercial and residential, see our semi-commercial mortgage guide. If you already own commercial property and want better terms, see our commercial remortgage guide.
Frequently asked questions
What is a commercial buy-to-let mortgage?
A mortgage on property let to business tenants, such as shops, offices and industrial units. Lenders usually call it a commercial investment mortgage.
How much deposit do I need?
Usually 30% to 40%. It depends on the tenant, the lease and the property.
Can I get a mortgage on an empty commercial unit?
It is harder. Fewer lenders will consider it, and bridging may be needed until a tenant is in.
How is commercial property valued?
Usually on its yield, comparing the rent with the value. Lease length and tenant quality have a big effect.
What Stamp Duty applies to commercial property?
In England and Northern Ireland, non-residential rates: 0% up to £150,000, 2% to £250,000 and 5% above.
Do I pay VAT on a commercial property?
You may, if the seller has opted to tax and the sale is not a transfer of a going concern. Get tax advice before you exchange.
Can I buy commercial property in a limited company?
Yes, and many investors do. Lenders usually ask directors for personal guarantees.
Speak to Option Finance about your investment
Tell us about the property, the tenant and the lease. We will tell you straight what it will borrow and which lenders fit.
Book a free initial consultation using the enquiry form below. See also our commercial mortgage advice.
Talk through your mortgage options
Tell us about your plans and circumstances. Your initial consultation is free.
Some buy-to-let and commercial mortgages are not regulated by the Financial Conduct Authority. Regulation depends on the mortgage type and circumstances.
Talk through your mortgage options
Tell us about your plans and circumstances. Your initial consultation is free.
Written and reviewed by Davi Thakar
Director & Senior Mortgage Broker
CeMAP Qualified Mortgage and Protection Adviser
Davi founded Option Finance with a vision to deliver transparent mortgage advice from a wide panel of lenders. With over 10 years in financial services, he specialises in complex cases including adverse credit, self-employed borrowers with limited trading history, and large buy-to-let portfolios. He works directly on complex cases and explains each option clearly.
Meet Davi Thakar
