Commercial Mortgages
Care Home Mortgages: How to Buy or Refinance a Care Home
Buying or refinancing a care home is specialist lending. The building matters, but lenders are really lending on the business, so your inspection rating, occupancy, fees and team all carry weight.
Written and reviewed by Davi Thakar, CeMAP qualified mortgage and protection adviser Updated
A care home mortgage is a commercial loan to buy or refinance a residential or nursing home. Lenders treat it as a trading business, not just a building, so they look hard at your inspection rating, occupancy, fee levels, profit and experience before they look at the bricks.
Most high street banks will not touch care homes. The lenders that do are specialists, and they all ask the same question: if this business struggled, could it keep paying? Get your figures and your story ready for that question and the rest gets much easier.
This guide covers what lenders check, how care homes are valued, deposits, costs and refinancing. For the bigger picture, see our commercial mortgage guide.
Can you get a mortgage to buy a care home?
Yes, from specialist commercial lenders. Expect to put down 30% to 40% and to show the home makes enough profit to cover the loan comfortably. Lenders want a Good or Outstanding rating, steady occupancy and an experienced team. First-time operators can still borrow, but usually need an experienced manager or partner alongside them.
What do lenders look at?
| Factor | What lenders want to see |
|---|---|
| Inspection rating | CQC in England rated Good or Outstanding. Requires Improvement cuts the number of lenders. Inadequate usually means specialist or short-term finance until it is fixed |
| Occupancy | Steady occupancy, often 85% or more over the last year |
| Fee mix | The split between private payers, council funded and NHS funded residents, and the average weekly fee |
| Profit | Earnings before interest, tax, depreciation and rent (EBITDA) that cover the loan payments with room to spare |
| Staffing | A registered manager in post, low turnover and agency costs under control |
| Experience | Your track record in care, or an experienced operating team |
| Building | Room sizes, en-suites, lifts and whether it meets modern standards |
Wales, Scotland and Northern Ireland have their own regulators: Care Inspectorate Wales, the Care Inspectorate and RQIA. Lenders read their reports the same way.
Which situations do lenders see most?
These are illustrative situations, not Option Finance client outcomes.
Buying your first home
You know care but have never owned a home. Lenders want to see your experience, your registered manager and a realistic business plan.
Bring a strong team and a bigger depositAdding a second home
You already run a good home. Lenders look at your group’s track record and whether you can manage two sites.
Your existing ratings do the talkingRefinancing to improve
You want money for an extension or refurbishment. Lenders look at current profit and the plan for the extra rooms.
Show how the works lift incomeTurning a home around
The home has a poor rating and empty beds. Mainstream lenders will usually wait until it improves.
Short-term finance first, then refinanceHow is a care home valued?
Care homes are valued on a trading basis by a specialist RICS valuer. The valuer works out the profit a competent operator could make from the home and applies a multiple. A home with full beds and a Good rating is worth far more than the same building half empty.
The valuer will also give a vacant possession value, what the building would be worth if the business closed. For many homes that figure is much lower. It is the main reason lenders keep their loan-to-value cautious.
How much deposit do you need?
- Loan-to-value: usually 60% to 70% for experienced operators. First-time operators may need more deposit or an experienced partner.
- Term: commonly 15 to 25 years.
- Rates: priced on risk and above residential mortgage rates.
- Covenants: some lenders set ongoing tests, such as minimum profit cover, and ask for regular management accounts.
Illustration only
An operator buys a 40-bed home rated Good for £4 million. With 90% occupancy and an average fee of £1,100 a week, income is about £2.06 million a year. If EBITDA is 25%, about £515,000, a lender offering 65%, £2.6 million over 20 years at 7.5%, would expect payments of about £251,000 a year. Profit covers that about twice.
What do you need to know when buying an existing home?
When you buy a going concern, the staff usually move across to you on their current terms under TUPE. GOV.UK explains how this works in its guide to business transfers, takeovers and TUPE.
You also need to be registered with the regulator before you take over. The CQC sets out the process in its guidance for new providers. This takes time, so lenders want to see it built into your timetable.
Have these ready for the lender:
- Three years of accounts and recent management accounts
- Occupancy and fee data by resident type
- The latest inspection report and any action plan
- Staffing levels, agency use and payroll
- Your business plan and CV
- Details of the building, including any planned works
What costs should you plan for?
- Stamp Duty at non-residential rates in England and Northern Ireland: 0% up to £150,000, 2% to £250,000 and 5% above. On a £4 million purchase that is about £189,500. See GOV.UK’s non-residential rates. Scotland and Wales have their own taxes.
- Specialist valuation, which costs more than a standard commercial valuation
- Arrangement fee, often 1% to 2% of the loan
- Legal fees, including regulatory and employment advice
- Working capital for the handover period
Can you refinance a care home to expand?
Often, yes. Operators refinance to release money for refurbishment, an extension or another home. Lenders look at current trading and the plan for the extra income. A rating that has moved up to Good can make a big difference to what you can borrow. See our commercial remortgage guide, or if you want to keep a good existing deal, our commercial second charge guide.
Frequently asked questions
Can I get a mortgage to buy a care home with no experience?
It is difficult but not impossible. Most lenders want care experience, so a first-time buyer usually needs an experienced registered manager or partner and a larger deposit.
How much deposit do I need for a care home?
Usually 30% to 40% of the price. It depends on the home’s trading record, its rating and your experience.
Does the CQC rating affect the mortgage?
Yes. Good or Outstanding opens up the most lenders. Requires Improvement narrows the choice, and Inadequate usually means short-term finance until the rating improves.
How are care homes valued?
On a trading basis by a specialist valuer, using the profit the home can make rather than just the value of the building.
What Stamp Duty applies to a care home?
Non-residential rates in England and Northern Ireland: 0% up to £150,000, 2% to £250,000 and 5% above.
How long does a care home purchase take?
Often three to six months, because of the specialist valuation, legal work and regulator registration. Start the finance early.
Can I buy a care home through a limited company?
Yes. Most care homes are bought through a company, and lenders usually ask directors for personal guarantees.
Speak to Option Finance about your care home
Tell us about the home, the price, current trading and your team. We will tell you straight which lenders are realistic, how much deposit you will need and what to have ready.
Book a free initial consultation using the enquiry form below. See also our commercial mortgage advice and hotel mortgage guide, which covers another trading business valued in a similar way.
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
